Legal services were provided to a credit customer.How would this affect the accounting equation?
A)Cash and Accounts Receivable increase.
B)Accounts Payable decreased and Capital decreased.
C)Accounts Receivable and Revenue increase.
D)None of the above is correct.

Question

Quizplus · Accepted Answer

When legal services are provided to a credit customer, it means the company has earned revenue. This would increase the Accounts Receivable (an asset account) as the customer is expected to pay in the future, and also the Revenue account (an equity account) as the company has earned income. There is no change in cash or accounts payable, hence options A and B are eliminated. Option D is incorrect as an increase in Accounts Receivable and Revenue would affect the accounting equation.

Legal Services Were Provided to a Credit Customer