Accounting for IGCSE & O level - The Fundamentals Of Accounting (Section 26 - No. 32)
What is the effect on the accounting equation when a company receives cash from a customer for services to be performed in the future?
Assets increase, Liabilities decrease
Assets increase, Liabilities increase
Assets decrease, Equity decreases
No effect on the accounting equation.
Explanation
Receiving cash increases assets, while the obligation to provide future services is a liability (unearned revenue).
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