3-Statement Change: Accounts Receivable Increases by $50

As a financial analyst, you are asked to walk through how a company's three financial statements change when it recognizes a $50 sale on credit — with revenue booked immediately, but the cash from the customer not collected until a later period.

1. Task Overview

Task: Trace the impact of a $50 credit sale (an increase in Accounts Receivable) on the Income Statement, Cash Flow Statement, and Balance Sheet in the period the sale is recognized.

Step 1: Given Data — The Transaction

A company makes an additional $50 sale on credit; the customer has not yet paid.

Step 2: Income Statement Impact

The $50 sale is recognized as revenue immediately under accrual accounting, regardless of when cash is received.

Using this formula, compute the increase in Net Income from the sale.

Step 3: Cash Flow Statement Impact

Net Income rises, but since the customer has not paid, the increase in Accounts Receivable is a use of cash that must be subtracted in the Cash Flow from Operations section.

Using this formula, compute the net change in cash for the period.

Step 4: Balance Sheet Impact

Assume:

• No other transactions occur during the period
• Taxes on the recognized income are paid in cash within the same period

Using these inputs, compute the resulting change in Cash, Accounts Receivable, and Retained Earnings, and confirm the Balance Sheet still balances.