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jbthomason · Jun 11, 2009, 05:42 PM

If services are rendered for credit, then:
a) assets will decrease
b)liabilites will increase
c)owner's equity will increase
d)liabilities will decrease

niravpatari · Sep 17, 2009, 03:11 PM

Answer is a

pready · Sep 17, 2009, 05:44 PM

If you provide a service on Credit then the journal entry is:
Debit Accounts Receivable for the amount
Credit Service Revenue for the amount

Assets will increase (Accounts Receivable)
This does not affect Liabilities

morgaine300 · Sep 18, 2009, 01:18 AM

niravpatari, please read our guidelines about homework in the red print at the top of this forum. We are not here to just give answers to people. Especially when all you do is give an answer to a multiple choice with no explanation for it. (And your answer is incorrect anyway.)

amymaria · Jun 2, 2011, 01:29 PM

C. A=L+OE
If Assets are increased, either liabilities or OE will be as well. Since this is clearly not a liability, it must be OE.

Adil1984 · Feb 26, 2012, 06:32 PM

The answer is B:

Account payable increases (Liabilities), and Owner equity will decreases. So the answer is B.
Look at Principal of financial accounting page 17 at the bottom.

pready · Feb 27, 2012, 06:17 PM

Account Payable is not affected because you are providing a service on credit. The two accounts affected are Service Revenue and Accounts Receivable.

Since you provided service on credit you are increasing an asset (accounts receivable) because the customer owes you money to be paid in the future.

Since service on credit does not affect a liability that leaves only one answer left, and that is C an increase in Owners Equity.

An increase in revenues will increase net income will ultimately increase Owners Equity. You provided a service, which means an increase in revenue, which means an increase in net income and an increase in Owners Equity.