Question

Which of the following transactions will result in an increase in income from operations as of the date of the transaction? A. The sale of plants and equipment at a gain.

B. Collection of cash from a customer for services to be provided at a later date.
C. Providing a service to a customer on account.
D. The receipt of cash dividends from an investment.

Answer 1

Providing a service to a customer on account will result in an increase in income from operations as it directly affects the company's revenue from its core business activities, and revenues are recognized when earned on an accrual basis.

Step-by-step explanation:

The transaction that will result in an increase in income from operations as of the date of the transaction is providing a service to a customer on account. This is because it directly affects the company's revenue from its core business activities. Reinvesting profits and decisions involving spending money on assets are targeted toward future earnings and growth, while income from operations focuses on current earnings through typical business activities.

When a company provides a service on account, it records the revenue immediately in the income statement, even though cash has not been received yet. This conforms to the accrual basis of accounting which recognizes revenues when they are earned, not when cash is received. This is in contrast to other options like the sale of plants and equipment or receiving cash dividends, which are considered non-operating income.