A transaction involving the receipt of a $10,000 retainer by an attorney's prior to any works being performed on behalf of the client would:
A)decrease assets
B)increase liabilities
C)increase net income
D)decrease stockholders' equity

Question

Quizplus · Accepted Answer

The receipt of a retainer by an attorney is considered a liability because the attorney now owes the client the work for which the retainer was given. The retainer is not considered revenue until the attorney performs the work and earns the fee, so it would not affect net income or stockholders' equity. It would not decrease assets because the cash received from the retainer would increase the asset balance.

A Transaction Involving the Receipt of a $10,000 Retainer by an Attorney's