Please describe how the following transactions affects the accounting equation: Provide service for cash
Increase, decrease of no change from the following accounts
Assets, Liability and Owners Equity
When providing a service for cash, multiple accounts are affected in the accounting equation. Let's break it down:
1. Assets: The asset account that is directly impacted by providing a service for cash is usually Cash or Accounts Receivable (if the client is given credit and will pay later). When the service is provided, there is an increase in the Cash account (or decrease in Accounts Receivable) as the cash is received. So, the asset side of the equation increases.
2. Liabilities: Providing a service for cash does not affect liabilities directly. Liabilities are usually associated with debts or obligations that the company owes to other entities. If the company has a loan or owes money to suppliers, the act of providing a service for cash does not change the liability status.
3. Owner's Equity: The owner's equity represents the ownership interest in the company. When a service is provided for cash, it results in an increase in owner's equity. This increase can be recorded as Revenue or Sales, reflecting the income generated from the service. Therefore, the owner's equity side of the equation increases.
In summary, providing a service for cash increases the asset side of the equation (specifically the Cash or Accounts Receivable account) and the owner's equity side of the equation (specifically the Revenue or Sales account). It does not directly affect liabilities.