Homework SourseExercise 24 Effect of accounts receivable and accounts payab
Exercise 2-4 Effect of accounts receivable and accounts payable transactions on financial statements LO 2-1, 2-2 The following events apply to Brown and Birgin, a public accounting firm, for the 2014 accounting period: 1. Performed $94,500 of services for clients on account. 2. Performed $53,000 of services for cash. 3. Incurred $54,000 of other operating expenses on account. 4. Paid $21,500 cash to an employee for salary. 5. Collected $67,000 cash from accounts receivable. 6. Paid $37,000 cash on accounts payable. 7. Paid a $8,000 cash dividend to the stockholders. 8. Accrued salaries were $4,600 at the end of 2014.
Solution
Effect of accounts receivable and accounts payable transactions on financial statements :
| Transaction | Effect on account receivable | Effect on account payable |
| 1. Performed $94,500 of services for clients on account. | Increase | No effect |
| 2. Performed $53,000 of services for cash. | No effect | No effect |
| 3. Incurred $54,000 of other operating expenses on account | No effect | Increase |
| 4. Paid $21,500 cash to an employee for salary | No effect | No effect |
| 5. Collected $67,000 cash from accounts receivable. | Decrease | No effect |
| 6. Paid $37,000 cash on accounts payable | No effect | Decrease |
| 7. Paid a $8,000 cash dividend to the stockholders. | No effect | No effect |
| 8. Accrued salaries were $4,600 at the end of 2014. | No effect | No effect |
