A Company Performed Tax Services for a Client on Account

question 56

Multiple Choice

A company performed tax services for a client on account.The amount billed to the client was $7,000.How does this transaction affect the accounting equation?

• A)Add $7,000 to Cash and add $7,000 to Service Revenue.
• B)Add $7,000 to Cash and add $7,000 to Retained Earnings.
• C)Add $7,000 to Accounts Receivable and add $7,000 to Retained Earnings.
• D)Add $7,000 to Accounts Payable and add $7,000 to Service Revenue.

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Definitions:

Personally Insolvent

A financial condition where an individual is unable to pay their debts as they become due.

Capital Accounts

Financial records that track the contributions to and distributions from owners or shareholders of a company, reflecting changes in ownership equity over time.

Final Settlement

Final Settlement refers to the conclusion of a financial transaction when the seller delivers the asset to the buyer and receives the agreed payment, fulfilling the contract's terms.

Profits and Losses

The financial gains or losses a company experiences, usually measured over a specific period of time.