What Are the Effects on the Accounting Equation from the Adjustment

question 16

Multiple Choice

What are the effects on the accounting equation from the adjustment for revenue earned during the accounting period that had previously been recorded as a liability?

• A)Total liabilities will increase and total stockholders' equity will decrease.
• B)Total liabilities will increase and total stockholders' equity will increase.
• C)Total liabilities will decrease and total stockholders' equity will increase.
• D)Total liabilities will decrease and total stockholders' equity will decrease.

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Definitions:

Revenue

The total amount of money received by a company for goods sold or services provided during a certain period.

Unearned Revenue

Income received by a company for services or products yet to be delivered or provided, often considered a liability until the service or product is delivered.

Tutoring Services

Professional educational services provided to individuals or small groups to improve their understanding and performance in specific subjects or skills.

Contract

A legally binding agreement between two or more parties defining the terms and conditions of a particular arrangement or transaction.