When a business provides services for cash, which elements of the accounting equation are affected? Multiple Choice Revenue and Expense Cash and Revenue Cash and Expense Cash and Dividends
When a business provides services for cash, which elements of the accounting equation are affected? Multiple Choice Revenue and Expense Cash and Revenue Cash and Expense Cash and Dividends
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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![### Understanding the Accounting Equation: Cash Transactions
When a business provides services for cash, which elements of the accounting equation are affected?
#### Multiple Choice
- **Revenue and Expense**
- **Cash and Revenue**
- **Cash and Expense**
- **Cash and Dividends**
The correct answer to this question lies in understanding how transactions impact the accounting equation. When a business provides services and receives cash, the transaction affects both the asset (Cash) and the revenue accounts.
In this case, "Cash and Revenue" are the key elements affected in the accounting equation.
#### Explanation:
- **Revenue** is recognized because the service has been provided.
- **Cash** (an asset) is increased because payment is received immediately.
This question helps reinforce the fundamental concept of the accounting equation:
\[ \text{Assets} = \text{Liabilities} + \text{Owner's Equity} \]
Receiving cash for services rendered directly impacts the assets and increases the owner's equity through revenue.
Understanding this correlation is crucial for students learning the basics of accounting, as it demonstrates how everyday business transactions are reflected in financial statements.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fbac5cd56-9885-4a25-8e51-dfc1bb78a29e%2Fd00eb7ed-9ff0-4c76-af18-a0d18596e5ef%2F37tbev8_processed.jpeg&w=3840&q=75)
Transcribed Image Text:### Understanding the Accounting Equation: Cash Transactions
When a business provides services for cash, which elements of the accounting equation are affected?
#### Multiple Choice
- **Revenue and Expense**
- **Cash and Revenue**
- **Cash and Expense**
- **Cash and Dividends**
The correct answer to this question lies in understanding how transactions impact the accounting equation. When a business provides services and receives cash, the transaction affects both the asset (Cash) and the revenue accounts.
In this case, "Cash and Revenue" are the key elements affected in the accounting equation.
#### Explanation:
- **Revenue** is recognized because the service has been provided.
- **Cash** (an asset) is increased because payment is received immediately.
This question helps reinforce the fundamental concept of the accounting equation:
\[ \text{Assets} = \text{Liabilities} + \text{Owner's Equity} \]
Receiving cash for services rendered directly impacts the assets and increases the owner's equity through revenue.
Understanding this correlation is crucial for students learning the basics of accounting, as it demonstrates how everyday business transactions are reflected in financial statements.
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