Root Company provided consulting services and billed the client $2,500. As a result of this event,
A) assets remained unchanged.
B) assets increased by $2,500.
C) equity increased by $2,500.
D) Both assets and equity increased by $2,500.

Question

Quizplus · Accepted Answer

Since Root Company provided consulting services and billed the client $2,500, it can be assumed that the revenue has been earned. This means there is an increase in assets (cash or accounts receivable) by $2,500 and an increase in equity (specifically, retained earnings) by $2,500, as revenue is recognized as an increase in equity. Therefore, both assets and equity increased by $2,500.

Root Company Provided Consulting Services and Billed the Client $2,500