Complete Question:
If Houston Company billed a client for 11,000 of consulting work completed, the accounts receivable asset increases by $11,000 and:
A. Revenue decreases $11,000.
B. Cash increases $11,000.
C. Accounts payable increases $11,000.
D. Revenue increases $11,000.
E. Accounts payable decreases $11,000
Answer:
If Houston Company billed a client for 11,000 of consulting work completed, the accounts receivable asset increases by $11,000 and:
D. Revenue increases $11,000.
Explanation:
This increase in revenue increases the retained earnings (equity) of Houston Company. The result is that the accounting equation will remain in balance with assets = $11,000 and Liabilities + Equity = $11,000. This accounting equation is the basis for the double-entry system of financial accounting. Provided that transactions are correctly recorded and accurately posted to their respective accounts, the accounting equation will not go out of balance.
