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

Question

Quizplus · Accepted Answer

The transaction involves the receipt of $10,000 by the CPA, which is considered a liability until work is performed to earn the money. Therefore, the transaction would increase liabilities (as the CPA is now responsible for providing services in exchange for the money) as well as increase assets (as the CPA now has $10,000 of cash). None of the other options accurately reflect the impact of this transaction.

A Transaction Involving the Receipt of a $10,000 by a CPA