The adjustment to record the completion of services for which clients had paid in advance would involve which of the following?
A) a decrease in assets and an increase in equity
B) a decrease in liabilities and an increase in equity
C) an increase in assets and a decrease in liabilities
D) an increase in liabilities and a decrease in equity

Question

Quizplus · Accepted Answer

The completion of services for which clients had paid in advance is a revenue recognition principle. It means that the company has now earned the revenue and needs to adjust their accounts. This adjustment involves decreasing the liability (prepayments) and increasing the equity (revenue). Therefore, the correct option is B) a decrease in liabilities and an increase in equity.

The Adjustment to Record the Completion of Services for Which