Which statement best explains why a cash receipt increases assets?

Which statement best explains why a cash receipt increases assets?

• A. It increases liabilities
• B. It increases equity
• C. It increases assets
• D. It decreases assets

Answer: (C)

Receiving cash directly adds to your cash balance, and cash is an asset. When the company gets cash, the asset side of the accounting equation increases by the amount received, so total assets grow. The exact credit side of the entry depends on where the cash came from (for example, a sale might credit revenue, while a collection on accounts receivable would credit accounts receivable), but the reason assets rise is simply the inflow of cash increasing the asset pool.

Receiving cash directly adds to your cash balance, and cash is an asset. When the company gets cash, the asset side of the accounting equation increases by the amount received, so total assets grow. The exact credit side of the entry depends on where the cash came from (for example, a sale might credit revenue, while a collection on accounts receivable would credit accounts receivable), but the reason assets rise is simply the inflow of cash increasing the asset pool.