A company performs services for a client on account. When the company receives the cash from the customer one month later:
A) a revenue account is increased.
B) a liability account is decreased.
C) an asset account is increased.
D) an expense account is decreased.

Question

Quizplus · Accepted Answer

When the company receives the cash from the customer one month later, an asset account (such as Accounts Receivable) is decreased, and a Cash account is increased, because cash is being received. The revenue account was already recorded when the company provided services on account, so it is not affected at this point. A liability account (such as Accounts Payable) and an expense account are not involved in this transaction.

A Company Performs Services for a Client on Account