Question

The business earns $700 of consulting revenue. How would these earnings affect the total equity of a business?a. Liabilities are decreased, so total equity is increased.b. Revenues would be decreased, so equity would be decreased.c. Revenues would be decreased, so equity is increased.d. Revenues increase, so total equity is increased.

Answer 1

Answer:

d. Revenues increase, so total equity is increased.

Explanation:

Consulting Revenue of $700 will increase the total revenue of the business and total equity of the business as the revenue will increase the net profit which will ultimately be added to the equity balance. Increase in revenue will result in increase in equity and Increase in expenses will decrease the equity.

Answer 2

Answer:

The correct answer is letter "D": Revenues increase, so total equity is increased.

Explanation:

Equity represents ownership. Equity is one of the three principal asset classes. The other two are fixed income and cash. Equity is the value of a business or property after its debts and liabilities are paid. When talking about accounting, increases in income raises the firm's equity.

Thus, if a company earns $700 after a service rendered, that income will increase the company's equity.