Legion Design Studio provided $5,000 of design services on account.How would Legion Claire Spa record this transaction?
A)Accounts Receivable increases by $5,000 and Design Services Revenue increases by $5,000.
B)Cash increases by $5,000 and Design Services Revenue increases by $5,000.
C)Cash increases by $5,000 and Accounts Receivable decreases by $5,000.
D)Accounts Receivable increases by $5,000 and Design Services Revenue decreases by $5,000
E)Cash decreases by $5,000 and Accounts Receivable increases by $5,000.

Question

Quizplus · Accepted Answer

Since the transaction is done on account, Accounts Receivable (an asset account) increases by $5,000 as Legion Design Studio is yet to receive the payment. At the same time, Design Services Revenue (a revenue account) also increases by $5,000 as the service has been provided. Thus, the correct option is A.

Legion Design Studio Provided $5,000 of Design Services on Account