A business renders services to a client and issues a sales invoice. The amount will be collected from the customer at a later time. Which of the following is true at the time the invoice is issued?

a) net income will increase

b) total liabilities will increase

c) total assets will decrease

d) equity will decrease

Question

Business

Chris Diaz

Yesterday, 19:12

A business renders services to a client and issues a sales invoice. The amount will be collected from the customer at a later time. Which of the following is true at the time the invoice is issued?

a) net income will increase

b) total liabilities will increase

c) total assets will decrease

d) equity will decrease

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Answers (1)

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Casey Braun · Answer 1

Option d) equity will decrease

Explanation:

The value of goods and services have a certain shelf-life. In other words, the goods have their highest value whilst they are on the shelves or before the invoice is issued out. This is the equity of the property or services. However, as soon as that invoice is written down, the value of the goods will not be equal, in some cases, to how they were a few days ago. Here is an example:

When someone's house is worth $ 200 000 and the person owes the back $ 180 000. The house has an equity of $ 20 000.