A business provides $100,000 of services for cash

Accounting Dec 16, 2020

A business provides $100,000 of services for cash. How does this impact the accounting equation?

Expert Solution

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.

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