Services are provided for customers who pay for their services immediately. What effect does this transaction have on the accounting equation?
A)Assets and liabilities increase.
B)Assets and retained earnings increase.
C)Liabilities increase and retained earnings decreases.
D)Assets and liabilities decrease.

Question

Quizplus · Accepted Answer

When customers pay for services immediately, the company's cash (an asset) increases, and the revenue generated increases retained earnings (part of equity), thus affecting the accounting equation by increasing assets and retained earnings.

Services Are Provided for Customers Who Pay for Their Services