A company collected $10,000 cash from a customer as a deposit for goods that will be shipped next quarter.

Which of the following items would be increased by this cash collection transaction? (check all that apply)

a) Total Assets

b) Accounts Receivable

c) Cash from Operations

d) Revenue

e) Total Liabilities

(A) Total assets,

(C) Cash from operations and

(D) Total liabilities

Explanation:

A company collecting $10,000 cash from a customer as a deposit for goods that will be shipped next quarter is an example of an unearned revenue. It is receiving money from the customer in advance for the good or service yet to be provided.

And this is considered as a liability and recorded in the balance sheet as such because the company now owes the customer.

When the good or service is now provided, it increases the total assets.

The answer are:

a) Total Assets

c) Cash from Operations

e) Total Liabilities

Explanation:

The entry for the transaction is:

Dr Cash 10,000

Cr Unearned Revenue 10,000

As Cash has been increased by $10,000, the Total Asset will increase by the same amount (because Cash Account is an asset account) and Cash from Operations will also increase by $10,000 because this receipt is from the result of the company normal business transaction.

As Unearned Revenue which is a Liability Account because good and services has not be delivered, increases by $10,00; total Liabilities will also increase by $10,000.