Zetom Company receives a bill from one of its suppliers for services received and will pay the supplier next month.How does the receipt of the bill from the supplier affect the accounting equation of Zetom?

Question

Quizplus · Accepted Answer

When Zetom receives a bill from its supplier, it incurs a liability to pay for the services received. This means that liabilities increase. At the same time, there is no change in assets because the services have already been received and recorded as expenses. As a result, equity decreases by the same amount as the increase in liabilities to maintain the accounting equation. Therefore, the correct answer is B, liabilities increase and equity decreases.

Zetom Company Receives a Bill from One of Its Suppliers