A company reported an increase in accounts receivable and an increase in unearned sales revenues during 2014. Which of the following statements is correct?
A) Cash collected from customers equals sales revenues plus both the increase in accounts receivable and the increase in unearned sales revenues.
B) Cash collected from customers equals sales revenues minus both the increase in accounts receivable and the increase in unearned sales revenues.
C)Cash collected from customers equals sales revenues plus the increase in accounts receivable, minus the increase in unearned sales revenues.
D)Cash collected from customers equals sales revenues minus the increase in accounts receivable, plus the increase in unearned sales revenues.

Question

Quizplus · Accepted Answer

Cash collected from customers is calculated by adjusting sales revenues for changes in accounts receivable and unearned sales revenues. An increase in accounts receivable means less cash was collected than sales made, so it is subtracted. An increase in unearned sales revenues means cash was collected in advance, so it is added.

A Company Reported an Increase in Accounts Receivable and an Increase