Question

How would the financial statements of Boston Company by affected by the billing of a client for $10,000 of consulting work completed?

a.Assets increase by $10,000; revenues increase by $10,000
b.Assets (Accounts Receivable) decrease by $10,000; Assets (Cash) increase by $10,000
c.Assets increase by $10,000; liabilities increase by $10,000
d.Assets increase by $10,000; liabilities decrease by $10,000

Answer 1

a) Assets increase by $ 10,000; revenues increase by $ 10,000

Step-by-step explanation:

The billing to a client results in an increase in receivables, an asset which is a debit. the consulting work is a revenue to the organization which is a credit.

The other options are not applicable, because the scenario (b) results in increase in cash collection of receivables which is not the transaction.

The scenarios (c) and (d) are not relevant because the transaction has no impact on liabilities