Question

When a company performs a service and immediately collects the cash from the​ customer, which of...

When a company performs a service and immediately collects the cash from the​ customer, which of the following would​ occur?

A.

Net income would increase.

B.

Expenses would decrease.

C.

Assets would decrease.

D.

​Shareholders' equity would decrease.

Business   Accounting   
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Answer #1

Answer:

When an organization performs a service & immediately collects the cash from customers, then such transactions result in an increase in revenue for the organization due to which net income will be increased & also the current assets in the form of cash & cash equivalents are increased.

When a company performs a service and immediately collects the cash from the​ customer, it does not have any impact on expenses & therefore expenses will not be increased or decreased. Currents assets in the form of cash & cash equivalents will be increased as the company receives the cash from its customer for the services performed.

Accordingly, Option (A) i.e. "Net income would increase" is the correct answer.

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