On August 15,a customer paid $3,000 for services provided a month earlier.The customer was billed on August 1.In transaction analysis,how does this transaction affect the accounting equation?
A)Add $3,000 to Cash account and add $3,000 to Service Revenue account.
B)Add $3,000 to Cash account and add $3,000 to Retained Earnings account.
C)Add $3,000 to Cash account and subtract $3,000 from Accounts Receivable account.
D)Add $3,000 to Accounts Payable account and add $3,000 to Cash account.

Question

Quizplus · Accepted Answer

Since the customer paid for services that were provided a month earlier, the revenue was already recognized and recorded in the Service Revenue account. Therefore, the transaction will only affect the balance sheet. The cash account will increase as the customer paid in cash, and the accounts receivable account will decrease as the outstanding balance is now settled. Thus, we add $3,000 to the cash account and subtract $3,000 from the accounts receivable account.

On August 15,a Customer Paid $3,000 for Services Provided a Month