Cash collected from customers can be computed by the following formula:
A) ending accounts receivable minus beginning accounts receivable plus sales
B) beginning accounts receivable minus ending accounts receivable minus sales
C) beginning accounts receivable minus ending accounts receivable plus sales
D) ending accounts receivable plus beginning accounts receivable minus sales

Question

Quizplus · Accepted Answer

The formula for cash collected from customers is beginning accounts receivable minus ending accounts receivable plus sales. This is because if you have beginning accounts receivable (the money customers owed you from the previous period), and you collect cash from them during the current period, you would subtract the ending accounts receivable (the amount they still owe you at the end of the period) to determine the total cash collected from customers. Adding sales to this formula reflects the fact that new sales generate new accounts receivable, which can be collected for cash in future periods.

Cash Collected from Customers Can Be Computed by the Following