For the following transaction,identify the type of change that would have occurred in the accounting equation: Assets = Liabilities + Issued Capital + Opening retained profits + Revenue - Expenses - Dividends
-
At the end of the accounting period,3 months' interest is owing to the company from the bank on a term deposit with the bank.
A) A liability increases and another liability decreases.
B) An asset decreases and a liability decreases.
C) An asset increases and revenue increases.
D) An asset increases and another asset decreases.

Question

Quizplus · Accepted Answer

When interest is owed to the company by the bank, the company's asset (interest receivable or bank balance) increases, and simultaneously, the revenue (interest income) also increases. This reflects the accrual accounting principle, where income is recognized when earned, not necessarily when received.

For the Following Transaction,identify the Type of Change That Would