Accounting for IGCSE & O level - The Fundamentals Of Accounting (Section 21 - No. 41)
What is the effect on the accounting equation when a business provides services to a customer on credit?
Assets increase, liabilities increase.
Assets decrease, liabilities increase.
Assets increase, equity increases.
Assets decrease, equity decreases.
Explanation
Accounts Receivable (an asset) increases and service revenue (increasing equity) is recognized.
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