A company performed tax services for a client on account. The amount billed to the client was $22,000. How does this transaction affect the accounting equation?
A)Add $22,000 to Cash and add $22,000 to Service Revenue.
B)Add $22,000 to Cash and add $22,000 to Retained Earnings.
C)Add $22,000 to Accounts Receivable and add $22,000 to Retained Earnings.
D)Add $22,000 to Accounts Payable and add $22,000 to Service Revenue.

Question

Quizplus · Accepted Answer

The transaction increases Accounts Receivable because the service was performed on account, and it increases Retained Earnings through Service Revenue, reflecting the income earned.

A Company Performed Tax Services for a Client on Account