Question

When a company provides services on account, the transaction would affect the balance sheet by increasing:

- service revenue.
- deferred revenue.
-accounts receivable.
-cash.

Answer 1

The transaction of providing services on account would increase 'accounts receivable' on the balance sheet, indicating expected future payment, without an immediate increase in cash.

Step-by-step explanation:

When a company provides services on account, it is essentially offering services that will be paid for at a later date. This means that there is an increase in accounts receivable on the balance sheet. Accounts receivable are considered an asset because they represent money that the company expects to receive in the future. This transaction does not increase cash immediately since payment hasn't been received yet.

Therefore, service revenue would be recognized on the income statement, not the balance sheet, and there would be no immediate change in cash, deferred revenue, or service revenue on the balance sheet. Deferred revenue would only increase if the payment was received in advance of the service being provided, which is not the case here.