A company performed tax services for a client on account.The amount billed to the client was $7,000.How does this transaction affect the accounting equation?
A)Add $7,000 to Cash and add $7,000 to Service Revenue.
B)Add $7,000 to Cash and add $7,000 to Retained Earnings.
C)Add $7,000 to Accounts Receivable and add $7,000 to Retained Earnings.
D)Add $7,000 to Accounts Payable and add $7,000 to Service Revenue.

Question

Quizplus · Accepted Answer

Performing services on account means the company has not yet received cash but is owed the amount, increasing Accounts Receivable. Service revenue increases Retained Earnings through the income statement.

A Company Performed Tax Services for a Client on Account