If a company is paid in full for services provided this month,how will the basic accounting equation be affected?
A)Liabilities will decrease.
B)Shareholders' equity will increase as revenue is recorded.
C)Liabilities will increase.
D)Shareholders' equity will increase as gains are recorded.

Question

Quizplus · Accepted Answer

When a company is paid in full for services provided in a particular month, it means that revenue is generated for the company. This revenue is recorded as an increase in the company's Shareholders' equity, which is a part of the basic accounting equation (Assets = Liabilities + Shareholders' equity). Since there is no change in the company's liabilities, the only effect would be an increase in Shareholders' equity.

If a Company Is Paid in Full for Services Provided