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Fundamentals of Financial Manageme...

15th Edition
Eugene F. Brigham + 1 other
ISBN: 9781337395250

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BuyFindarrow_forward

Fundamentals of Financial Manageme...

15th Edition
Eugene F. Brigham + 1 other
ISBN: 9781337395250
Textbook Problem

Indicate using a (+), (–), or (0) whether each of the following events would probably cause accounts receivable (A/R), sales, and profits to increase, decrease, or be affected in an indeterminate manner:

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Summary Introduction

To identify: The effect of given transactions on accounts receivable, sales, and profits.

Introduction:

Accounts Receivables:

The accounts receivable refers to the amount which is outstanding due to credit sales. This is the pending amount from the customers for the payment towards the company for purchased goods on credit, and not on cash basis.

Accruals: The incurred expenses without payment of cash related to those expenses are termed as accruals. These are classified as current liabilities (short-term) in the financial statements.

Sales: Sales are referred to the transfer of goods or services produced by or dealt in by the seller to the buyer, either on cash or credit basis.

Profit: It indicates that amount which is determined by a company after deduction of incurred expenses from the total amount of its income earned relevant to same financial period.

Explanation
  • The restricted credit policy refers that the company will provide very less credit which decreases the credit sales and accounts receivable. The amount of profit may increase or decrease.
  • The higher discount offer will attract more sales and earlier payments. This will result in a decrease in accounts receivable and increase in sales...

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