Final answer:
Receiving full payment for services affects the accounting equation by increasing both assets and equity. The cash asset and revenue portion of equity both rise, which corresponds to an increase in the company's resources and owner's claim to those resources.
Step-by-step explanation:
If a company is paid in full for services provided this month, it will affect the basic accounting equation, which is Assets = Liabilities + Equity. When the payment is received, the company's cash (an asset) increases, which then increases the equity because the revenue has been earned, assuming there are no new liabilities associated with the payment.
The transaction would be recorded as an increase in assets and an increase in equity, specifically in the retained earnings or revenue accounts within equity.
Here's how the transaction would be recorded:
- Debit: Increase in Cash (Asset)
- Credit: Increase in Revenue (Equity)
This assumes that the revenue has been recognized according to the generally accepted accounting principles (GAAP), which typically dictate that revenue is recognized when earned, regardless of when the cash is received.