If a company gets cash from its distributors, which item will be affected?

The answer to the question is assets will be affected but I don't completely understand why assets will be affected. A detailed explanation would be helpful.

2 Answer(s)


As per my understanding, if the distributors owe money to Dominos, it's considered to be a current asset for Dominos and when they receive the money, current assets go down but at the same time cash balance goes up.


journal entry for the transaction

cash a/c dr (increase in Current asset)
to distributor a/c (decrease in current asset)
distributor owe money to xyz co. - current asset. when distributor pays money to xyz co. current asset as in the books of xyz co. comes down, mean while cash other current asset goes up.. and hence asset side of B/S is affected.