Final answer:
Hansen Enterprises' transaction for providing services for cash increased their assets and retained earnings accounts. It did not affect common stock or liabilities. A similar banking transaction shows how loans can also increase a bank's assets and reserves.
Step-by-step explanation:
When Hansen Enterprises provided services to clients for cash, this transaction increased two accounts: assets and retained earnings. In the provided scenario, as Hansen Enterprises renders services, they receive cash, which promptly increases their cash balance—cash being one of the most liquid forms of assets on a company's balance sheet. In accordance with the double-entry bookkeeping system, while the asset account increases, so does the equity account. Specifically, an increase in earnings from the services rendered contributes to an increase in retained earnings, which is a component of equity.
It's important to note that this transaction would not affect common stock, as common stock represents the equity raised by a business through the issuing of shares and has no direct correlation with revenue from services. Nor would it affect liabilities, as there is no borrowing or obligation incurred in this transaction.
Let's consider a similar example: Singleton Bank lends $9 million to Hank's Auto Supply. This loan increases Singleton Bank's assets, as it is expected to generate interest income, thus it's considered an asset. At the same time, the balance sheet of First National Bank shows a rise in deposits due to Hank depositing the loan amount, which increases its reserves.