What Is the Impact on the Accounting Equation of Recording

question 170

Multiple Choice

What is the impact on the accounting equation of recording the accrual of wages expense?

• A) Assets and liabilities both decrease.
• B) Assets and shareholders' equity both decrease.
• C) Liabilities decrease and shareholders' equity increases.
• D) Liabilities increase and shareholders' equity decreases.

---

Definitions:

Accounts Payable

Liabilities of a business that represent amounts owed to suppliers or creditors for goods and services received but not yet paid for.

Balance Sheets

Financial statements that summarize a company's financial position at a specific point in time, detailing assets, liabilities, and shareholders' equity.

Service Company

A company that provides services to customers as its primary business operations, rather than selling tangible goods.

Inventory

Materials and products that a company holds for the ultimate goal of resale or utilization in production.