A receptionist worked one month and was paid $2,000 at the end of the month.In transaction analysis,how does this transaction affect the accounting equation?
A)Add $2,000 to Cash account and add $2,000 to Accounts Payable account.
B)Add $2,000 to Accounts Receivable account and subtract $2,000 from Cash account.
C)Add $2,000 to Salary Expense and subtract $2,000 from Retained Earnings account.
D)Subtract $2,000 from Cash account and subtract $2,000 from Retained Earnings account.

Question

Quizplus · Accepted Answer

When the receptionist is paid $2,000 at the end of the month, it is a cash transaction, which means that the cash account is decreased by $2,000. At the same time, as the receptionist has already worked for the company, the company owes her money in the form of salaries. Therefore, the retained earnings account is decreased by $2,000 to reflect the expense incurred by the company in paying the receptionist, which can also be recorded as a decrease in owner's equity. There is no involvement of accounts payable, accounts receivable, or salary expense in this transaction.

A Receptionist Worked One Month and Was Paid $2,000 at the End