XYZ Co.received $3,000 in payments from clients for services billed in a previous month.Which accounts will be affected and by what amounts under the accrual basis of accounting?
A) Cash will increase by $3,000 and accounts receivable decrease by $3,000.
B) Cash will increase by $3,000 and revenues will increase $3,000.
C) Accounts receivable will increase by $3,000 and revenue will increase by $3,000.
D) Accounts receivable will increase by $3,000 and cash will increase by $3,000.

Question

Quizplus · Accepted Answer

Under the accrual basis of accounting, when XYZ Co. receives $3,000 in payments for services previously billed, Cash increases by $3,000 because the company is receiving money. At the same time, Accounts Receivable decreases by $3,000 because the amount owed by clients (previously recorded as Accounts Receivable) is being paid off.

XYZ Coreceived $3,000 in Payments from Clients for Services Billed in in a Previous