You produce an invoice for $1,346, increasing the Construction Income account. Show what other account is increased using the ex

Question

dalvyx [7]

3 years ago

3

You produce an invoice for $1,346, increasing the Construction Income account. Show what other account is increased using the ex

tended accounting equation.

Business

1 answer:

ikadub [295] · Answer 1 · 2022-07-01T04:22:15+03:00

Answer:

While the Construction Income account is increased by $1,346 (Equity - Retained Earnings, the other account that is increased is the Accounts Receivable account (Assets) in the extended accounting equation.

Explanation:

The accounting equation is Assets = Liabilities + Equity. This implies that every business transaction affects Assets, Liabilities, and Equity and always keep the equation in balance. A transaction may also affect only one side of the accounting equation. For example, cash received from customers (on credit account) will increase the Cash account and decrease the Accounts Receivable account, which only affects the Asset side of the equation.