Jane Is a Painting Contractor Operating as a Sole Proprietor

question 2

Multiple Choice

Jane is a painting contractor operating as a sole proprietor. On 15 May she completes a job for a client who pays her $1500 in cash. The effect of this transaction on the accounting equation is?

• A) Cash at bank increases by $1500; Accounts payable decreases by $1500.
• B) Cash at bank increases by $1500; Equity increases by $1500.
• C) Cash at bank increases by $1500; Accounts receivable decreases by $1500.
• D) Cash at bank increases by $1500; Accounts payable increases by $1500.

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Definitions:

Limited Liability Company

A business structure that combines the pass-through taxation of a partnership or sole proprietorship with the limited liability of a corporation.

Partnership

An unincorporated business form consisting of two or more persons conducting business as co-owners for profit.

Corporation

A legal entity that is separate and distinct from its owners, who are shareholders; it has its own rights, privileges, and liabilities independent of its shareholders.

American Red Cross

A humanitarian organization that provides emergency assistance, disaster relief, and education inside the United States.