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Impact of activity on the accounting equation

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What is the impact on the accounting equation of receiving a check from customers for work to be performed over the next three periods (none in this period)?

A.
Assets: increase
Liabilities: increase
Equity: no change

B.
Assets: increase
Liabilities: no change
Equity: increase

C.
Assets: increase
Liabilities: decrease
Equity: increase

D.
Assets: increase
Liabilities: increase
Equity: increase.

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Solution Summary

Students often have trouble analyzing the impact of business events on the accounting equation and individual accounts. By improving this skill, they get better at recording transactions and thinking through the impact of events. This question helps them to practice how events impact the balance sheet areas (assets, liabilities and equity).

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Answer: A

Reasoning:

If you receive a check but have not performed yet, you cannot record the revenue from this yet. ...

Solution provided by:
Carol Sargent, PhD
Education
  • BSc, University of Virginia
  • MSc, University of Virginia
  • PhD, Georgia State University
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