Root Company Provided Consulting Services and Billed the Client $2,500

question 170

Multiple Choice

Root Company provided consulting services and billed the client $2,500. As a result of this event,

• A) assets remained unchanged.
• B) assets increased by $2,500.
• C) equity increased by $2,500.
• D) Both assets and equity increased by $2,500.

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Definitions:

Inventory System

An inventory system is a mechanism for tracking the sale, purchase, and storage of goods, facilitating efficient management and control of inventory.

DSO

Days Sales Outstanding, a financial metric that calculates the average number of days it takes a company to collect payment after a sale has been made.

Compensating Balances

Minimum cash balances that a borrower agrees to maintain in a demand deposit account as a condition for a loan.

Transactions Balance

The amount of money held to facilitate day-to-day financial transactions, reflecting the liquidity needed for regular expenditures.