What happens when Falana receives $7,000 in cash for services rendered?

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Study for the Accounting CBE Exam. Gain insights with flashcards and multiple-choice questions, each paired with detailed explanations. Prepare for your accounting certification!

Multiple Choice

What happens when Falana receives $7,000 in cash for services rendered?

Explanation:
The main idea is that when you receive cash for services, you increase both assets and owner's equity. Cash is an asset, so receiving cash debits the asset and increases its balance. Revenue from providing services increases earnings, which raises net income and, in turn, increases owner's equity through retained earnings. So the overall effect is an increase in assets and an increase in owner's equity. The correct interpretation is that cash goes up and revenue goes up, leaving the accounting equation in balance.

The main idea is that when you receive cash for services, you increase both assets and owner's equity. Cash is an asset, so receiving cash debits the asset and increases its balance. Revenue from providing services increases earnings, which raises net income and, in turn, increases owner's equity through retained earnings. So the overall effect is an increase in assets and an increase in owner's equity. The correct interpretation is that cash goes up and revenue goes up, leaving the accounting equation in balance.

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