Funeral Arts National Board Practice Exam

What happens when a payment is recorded for a funeral?

1. Accounts payable increases

2. Accounts receivable decreases

3. Cash flow remains unchanged

4. Liabilities increase

The correct answer is: Accounts receivable decreases

When a payment is recorded for a funeral, it results in a decrease in accounts receivable. This occurs because accounts receivable represents money owed to the business for services rendered, such as a funeral service. When a payment is received, it indicates that the customer has settled their obligation, thus reducing the amount that is owed to the business. This process also positively impacts cash flow, as the payment increases the amount of cash available to the business. The recording of a payment does not increase accounts payable or liabilities; in fact, it typically highlights a reduction in owed amounts, aligning with the management of financial records in the funeral service industry.