Question

Assume that Global Cleaning Service performed cleaning services for a department store on account for​ $180. How would this transaction affect Global Cleaning​ Service's accounting​ equation? A. Increase both assets and liabilities by​ $180 B. Decrease liabilities by​ $180, and increase equity by​ $180 C. Increase both liabilities and equity by​ $180 D. Increase both assets and equity by​ $180

Answer 1

Answer:

D. Increase both assets and equity by​ $180

Explanation:

When a service is done on account, revenue will be recognized but the corresponding assets is accounts receivables and not cash. Hence the transaction will increase the company's revenue and assets balances . Revenue is turned into equity through retained earnings.

The accounting equation is

assets = liabilities + equity

This transaction will increase assets and equity be $180 each.