Services are provided for customers who pay for the services immediately.For this transaction,identify the effect on the accounting equation.
A)Assets increase and liabilities increase.
B)Assets increase and stockholders' equity increases.
C)Liabilities increase and stockholders' equity decreases.
D)Liabilities decrease and assets decrease.

Question

Quizplus · Accepted Answer

When a customer pays for the services immediately, the company's assets increase in the form of cash, and this is balanced by an increase in stockholders' equity because the company has earned revenue. There is no change in liabilities in this transaction. Therefore, option B is the correct answer.

Services Are Provided for Customers Who Pay for the Services