Question

Exercise 2-4 Effect of accounts receivable and accounts payable transactions on financial statements LO 2-1, 2-2 The following events apply to Brown and Birgin, a public accounting firm, for the 2014 accounting period: 1. Performed $94,500 of services for clients on account. 2. Performed $53,000 of services for cash. 3. Incurred $54,000 of other operating expenses on account. 4. Paid $21,500 cash to an employee for salary. 5. Collected $67,000 cash from accounts receivable. 6. Paid $37,000 cash on accounts payable. 7. Paid a $8,000 cash dividend to the stockholders. 8. Accrued salaries were $4,600 at the end of 2014.

Answer 1

Effect of accounts receivable and accounts payable transactions on financial statements :

Transaction	Effect on account receivable	Effect on account payable
1. Performed $94,500 of services for clients on account.	Increase	No effect
2. Performed $53,000 of services for cash.	No effect	No effect
3. Incurred $54,000 of other operating expenses on account	No effect	Increase
4. Paid $21,500 cash to an employee for salary	No effect	No effect
5. Collected $67,000 cash from accounts receivable.	Decrease	No effect
6. Paid $37,000 cash on accounts payable	No effect	Decrease
7. Paid a $8,000 cash dividend to the stockholders.	No effect	No effect
8. Accrued salaries were $4,600 at the end of 2014.	No effect	No effect