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If a company collects money from A/R, which of the following is correct? a- A/R Account reduce B-current Ratio increase C-current ratio decrease?

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Question ajoutée par ryad abdalla , chief of accounts , Evntoo
Date de publication: 2015/11/04
SREEDEVI SUNILKUMAR
par SREEDEVI SUNILKUMAR , Business finance officer , Emirates Airline

a. Accounts receivable Account reduce 

Haytham Ref'at Khouli
par Haytham Ref'at Khouli , Senior Financial Manager , ESNAD for Companies Management

The Answer is (A) - A/R account Reduce.

 

Transfer the money from A/R account  to cash or bank accounts will not affect the current ratio.

current ratio = current assets / current liabilities.

the current assets including cash and A/R, so, the sum of them always the same !! 

 

another point;

collecting money from A/R mean you credited the A/R, so, you reduce the A/R.

the entry as follow:

Dr. Cash (Increase the cash by the amount)

Cr. A/R ( Reduce the A/R by the same amount)

ryad abdalla
par ryad abdalla , chief of accounts , Evntoo

answer a  is best answer

A/R Account reduce

Mubeen Ansari
par Mubeen Ansari , General Manager Accounts and Administration , Balochistan Engineering Works Limited

a-A/R Account reduce.

No effect on current ratio.

Sara Naeem
par Sara Naeem , Trainee Finance officer , Wah Brass Mill

option A is correct one............................

Utilisateur supprimé
par Utilisateur supprimé

Accounts Receivable will decrease

Utilisateur supprimé
par Utilisateur supprimé

Current ratio will not affect because the current assets will be the same by increasing cash and decreasing accounts receivable . So option  A  is right .

mohamed Hakim CMA CPA Candidate
par mohamed Hakim CMA CPA Candidate , Accounting Manager , Andersen saudi arabia

Answer A is the Correct one

 

Accounts Receivable will decrease

 

Bishan Jamwal
par Bishan Jamwal , Finance Manager , G4S Qatar WLL

AR will reduce & OCf will improve.....

ARIF MAHMUD
par ARIF MAHMUD , Accounts & Admin Executive , NewVision Solutions Ltd.

From my point of understanding I think the answer is (a) A/R Account Reduce, as long as the current ration is equals (Total Current Asset/Total Current Liability) the changes in the ratio will not change because the A/R remains current asset.

Michael Lagunday
par Michael Lagunday , Accounts Assistant , Invest Group Overseas LLC

My answer is a. A/R/account reduce.

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