Question

In May 2013, Nikea recorded the transaction by debiting accounts receivable for $10,000 and crediting service revenues for $10,000. What is the effect of this entry on the accounting equation

Answer 1

Answer:

Please see explanation below.

Explanation:

Given the above, Accounts receivable is an asset. A debit in asset increases the asset. Also, crediting servicing revenue means an increase in equity because service revenue is also part of what makes an equity.

Therefore, debiting accounts receivables and crediting servicing revenue has increased both the assets and equity of Nikea inc.