Suppose a business receives a bill for services rendered from one of its suppliers. The business...
Suppose a business receives a bill for services rendered from one of its suppliers. The business will pay the supplier next month. When the business receives the bill from its supplier, explain how this affect the accounting equation in terms of increasing or decreasing assets, liabilities, or owner’s equity?
Homework Answers
Solution:
When the business receives the bill from its supplier, it means services has been rendered by the supplier therefore business will book the expense and therefore it will decrease the owner's equity in accounting equation. As payment is not done at the time of receipt of bill, therefore business will record liabilities, therefore liabilities would increase in the accounting equation. There will be no impact on asset due to this transaction.
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Suppose a business receives a bill for services rendered from
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