Davis,Inc. ,a music group,entertained at a black-tie dinner dance on April 26,and collected the fee in full at the end of the evening.This transaction:
A)Causes an increase in assets and revenue,as well as an increase in owners' equity.
B)Is recorded by debiting Cash and crediting the Retained Earnings account.
C)Causes an increase in assets and a decrease in owners' equity.
D)Violates the matching principle unless any expenses associated with this cash receipt are paid prior to recording the revenue.

Question

Quizplus · Accepted Answer

The transaction increases the assets of the company (Cash) and generates revenue from the performance. This revenue increase also leads to an increase in owners' equity, which represents the company's net worth. Therefore, option A is the best choice. Option B is incorrect because it suggests that the company is crediting its Retained Earnings account, which is not a typical account to use in recording revenues. Option C is incorrect because the transaction does not decrease owners' equity. Option D is incorrect because the matching principle does not apply in this scenario since the revenue was earned and collected at the same time.

Davis,Inc ,A Music Group,entertained at a Black-Tie Dinner Dance on April