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A business provides $100,000 of services for cash. How does this impact the accounting equation?
The basic accounting equation is Assets = Liabilities + Equity
If a business provides $100,000 of services for cash the journal entry would be as follows:
Account | Debit | Credit |
---|---|---|
Cash | XXX | |
Service Revenue | XXX |
A debit on cash account represents increase in asset of $100,000 while a credit on service revenue account represents increase in equity accounts due to the increase in retained earnings account. Therefore, the effect in the accounting equation will be an increase in assets and equity amounting to $100,000.