View the transaction and its impact on the Balance Sheet. Transaction 4: Our company performs services worth $10,000 for a customer. This customer pays us in cash at the time of service. We must ask ourselves what account is used when we perform services. The answer is the revenue account.As you learned last week, revenue accounts add to retained earnings, which is an equity account, and cash is an asset account.To increase an equity account, we must credit the account, and to increase an asset account, we must debit the account.The equation will remain in balance because we will have a $10,000 addition on the debit or left-hand side of the balance sheet equation and a $10,000 addition on the credit or right-hand side of the balance sheet equation.
View the transaction and its impact on the Balance Sheet.
Transaction 4: Our company performs services worth $10,000 for a customer. This customer pays us in cash at the time of service.
We must ask ourselves what account is used when we perform services. The answer is the revenue account.As you learned last week, revenue accounts add to retained earnings, which is an equity account, and cash is an asset account.To increase an equity account, we must credit the account, and to increase an asset account, we must debit the account.The equation will remain in balance because we will have a $10,000 addition on the debit or left-hand side of the balance sheet equation and a $10,000 addition on the credit or right-hand side of the balance sheet equation.
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