If Petey's Printing is providing printing services on account, how is his balance sheet affected?
A)Assets decrease; owner's equity decreases
B)Assets increase; owner's equity increases
C)Liabilities increase; owner's equity decreases
D)Assets increase; owner's equity decreases
E)Liabilities decrease; assets increase

Question

Quizplus · Accepted Answer

Providing services on account will increase an asset (the A/R account) and increase the owner's equity account.
Key Takeaway: The basic accounting equation: Assets = Liabilities + Owner's Equity comes in handy for balance sheet questions regarding increases and decreases. Since the services rendered will increase revenue, which is an increase to owner's equity, there should be a corresponding increase to an asset. In this case, since the transaction was on account, it would be the accounts receivable.

If Petey's Printing Is Providing Printing Services on Account, How