A receptionist worked one month and was paid $3,800 on the last day of the month.How does this transaction affect the accounting equation?
A)Add $3,800 to Cash and add $3,800 to Accounts Payable.
B)Add $3,800 to Accounts Receivable and subtract $3,800 from Cash.
C)Add $3,800 to Salary Expense and subtract $3,800 from Retained Earnings.
D)Subtract $3,800 from Cash and subtract $3,800 from Retained Earnings.

Question

Quizplus · Accepted Answer

When the receptionist is paid, cash is reduced by $3,800, as the company has paid an expense. The reduction of cash will reduce the company's retained earnings, as the company's assets have been reduced. Therefore, the accounting equation will be affected by a decrease of $3,800 to both cash and retained earnings, resulting in a decrease of the total equity of the business.

A Receptionist Worked One Month and Was Paid $3,800 on the Last