Your company received payment last month for a service that you provided this month.How will the business activity of the current month affect the basic accounting equation?
A)Assets will not change;liabilities (Unearned Revenue)will decrease;and stockholders' equity (Service Revenue)will increase.
B)Assets (Cash)will increase,liabilities (Unearned Revenue)will increase,and stockholders' equity will not change.
C)Assets (Cash)will increase,liabilities will not change,and stockholders' equity (Service Revenue)will increase.
D)Assets (Prepaid Expenses)will decrease,liabilities will not change,and stockholders' equity (Service Revenue)will increase.

Question

Quizplus · Accepted Answer

The service provided this month will lead to an increase in stockholders' equity (Service Revenue), but since the payment for the service was received last month, the liabilities (Unearned Revenue) will decrease. There will be no change in assets. Therefore, option A is correct.

Your Company Received Payment Last Month for a Service That