Performing services on account will have the following effects on the components of the basic accounting equation:
Answer: B) Increase assets and increase equity
- A) Increase assets and decrease equity.
- B) Increase assets and increase equity
- C) Increase assets and increase liabilities
- D) Increase liabilities and increase equity
Explanation
Assets and equity both increase. Doing work on account creates accounts receivable, an asset. It also earns service revenue, and revenue raises owner's equity through profit. No liability is created because the business owes nothing; the customer owes the business.
Asked in: KGDCL 2021