How does receiving a bill to be paid next month for services received affect the accounting equation?
A) assets decrease; owner's equity decreases
B) assets increase; liabilities increase
C) liabilities increase; owner's equity increases
D) liabilities increase; owner's equity decreases

Question

Quizplus · Accepted Answer

Receiving a bill to be paid next month for services received means that the company incurred an expense but has not paid for it yet. This creates a liability because the company owes money to the service provider. Therefore, the accounting equation is affected in the following way:

Liabilities increase (due to the amount owed to the service provider)
Owner's equity decreases (because the expense reduces the company's net income, and thus its retained earnings)

How Does Receiving a Bill to Be Paid Next Month