Question

Piscataway Consulting recently completed jobs for its customers. Payments for the current month's consulting services are expected to be received next month. How does this transaction affect the accounting equation of Piscataway Consulting?

Group of answer choices

assets and stockholders’ equity decrease

assets and stockholders’ equity increase

liabilities increase and stockholders’ equity decreases

liabilities and stockholders’ equity increase

Answer 1

Jobs for customers are completed this month, So it is revenue. Revenue will increase the income and thus shareholders equity will increase. So this transactionwill lead to increase in shareholders equity.

As payment for this month job will be received in next month, it is outstanding from customers. So accounts receivable will increase due to this transaction. Accounts receivable is part of asset. So asset will increase due to this transaction.

So answer is b, assets and stockholders equity will increase.