A business invoices a customer $200 for maintenance services supplied on credit.The effect of this transaction on the accounting equation is:

Question

Quizplus · Accepted Answer

The transaction involves providing maintenance services on credit, which means it is recorded as accounts receivable. Therefore, there is an increase in the asset accounts receivable by $200. At the same time, the business has earned revenue from the service, so there is an increase in profit or loss by $200 to record the services income. Option B is incorrect because cash was not involved in the transaction. Option C is incorrect because the company has not yet received any payment. Option D is incorrect because accounts receivable would increase, and not decrease, in this transaction.

A Business Invoices a Customer $200 for Maintenance Services Supplied