On August 1, Genuine Services accepted a $6,000 advance payment from a customer for services to be provided in the future. The contract requires the company to review operations at each of the customer's six locations over the next 6 months. What is the impact on the accounting equation of recording this transaction on August 1st?

Question

Quizplus · Accepted Answer

When Genuine Services accepted the advance payment, there was an increase in assets (cash) and liabilities (unearned revenue). The increase in assets reflects the receipt of cash, while the increase in liabilities reflects the obligation to provide services to the customer. Therefore, the accounting equation would be impacted by an increase in both assets and liabilities.

On August 1, Genuine Services Accepted a $6,000 Advance Payment