Question

June 5: The Anderson Photography Studio photographed KMV Inc. executives and billed them $800 for services....

June 5: The Anderson Photography Studio photographed KMV Inc. executives and billed them $800 for services. KMV Inc. promised to pay Anderson Photography Studio by July 5. The company's accounting system used only the following accounts: Cash, accounts receivable, photography supplies, prepaid rent, accounts payable, common stock, retained earnings, dividends, fees revenue, and telephone expense. By addition and subtraction, show the effects of the transactions on Anderson Photography Studio's resources and sources of resources.

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Answer #1

In this case Anderson Photography will recognize a revenue of $800 on June 5th and will also recognize accounts receivable of $800 on the same date.

The accounting equation is: assets = liability + equity

The effect of the transaction on June 5th will be:

Equity
Assets = Liabilities + Revenue - Expenses
Jun-05 800 = 800
(accounts receivable)

On July 5th when cash is received Anderson Photography will debit cash by $800 and credit accounts receivable by $800 and so assets amount will remain unchanged. Thus on July 5th: 800 (cash) - 800 (accounts receivable) = $0

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