XYZ Corp.made cash sales to customers.What effect does this transaction have on the accounting equation?
A)Liabilities increase and stockholders' equity increases.
B)There is no effect on the accounting equation as one asset account increases while another asset account decreases.
C)Assets increase and liabilities increase.
D)Assets increase and stockholders' equity increases.

Question

Quizplus · Accepted Answer

When XYZ Corp. makes cash sales to customers, assets increases because cash is received, and stockholders' equity increases because revenue is earned. There is no effect on liabilities in this transaction. Therefore, choice D is the correct answer.

XYZ CorpMade Cash Sales to Customers