Assume that Global Cleaning Service performed cleaning services for a department store on account for $180. How would this transaction affect Global Cleaning Service's accounting equation? A. Increase both assets and liabilities by $180 B. Decrease liabilities by $180, and increase equity by $180 C. Increase both liabilities and equity by $180 D. Increase both assets and equity by $180

Question

Easton Cobb

Business

7 January, 11:57

Assume that Global Cleaning Service performed cleaning services for a department store on account for $180. How would this transaction affect Global Cleaning Service's accounting equation? A. Increase both assets and liabilities by $180 B. Decrease liabilities by $180, and increase equity by $180 C. Increase both liabilities and equity by $180 D. Increase both assets and equity by $180

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Jaylyn Chavez · Answer 1

D. Increase both assets and equity by $180

Explanation:

When a service is done on account, revenue will be recognized but the corresponding assets is accounts receivables and not cash. Hence the transaction will increase the company's revenue and assets balances. Revenue is turned into equity through retained earnings.

The accounting equation is

assets = liabilities + equity

This transaction will increase assets and equity be $180 each.