ASU BIO202 Anatomy Physiology II Exam 1 Practice Exam

A company provides services for $18,000 on account. What is the immediate effect on the accounting equation?

Assets increase $18,000 and shareholders' equity increases $18,000 Assets decrease $18,000 and liabilities decrease $18,000 Assets increase $18,000 and liabilities increase $18,000 Liabilities decrease $18,000 and shareholders' equity increases $18,000

Correct Answer:

Assets increase $18,000 and shareholders' equity increases $18,000

Explanation:

Accounts receivable increases by $18,000 and service revenue increases retained earnings through net income by $18,000.

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