Question

Hargrave Professional Group performs legal services on account. What are the effect of this transaction on the balance sheet equation?

a)increase assets
b)increase liabilities
c)decrease assets

Answer 1

When Hargrave Professional Group performs legal services on account, it records an increase in assets and an increase in liabilities on the balance sheet.

Step-by-step explanation:

When Hargrave Professional Group performs legal services on account, it records an increase in assets and an increase in liabilities on the balance sheet.

This transaction increases the accounts receivable (assets) as the firm expects to be paid by its clients in the future. At the same time, it increases accounts payable (liabilities) as the firm incurs an obligation to pay for the services received, such as fees or expenses related to the legal services provided.

Example:

Let's say Hargrave Professional Group provides legal services worth $1,000 to a client on account. This transaction will increase the accounts receivable by $1,000 (assets) and increase the accounts payable by $1,000 (liabilities).