Question

a company received a utility bill of $690 but did not pay it. indicate the amount of increases and decreases in the accounting equation. note: decreases to account - classifications should be entered as a negative.

Explanation:

Step1: Analyze the accounting - equation impact

The accounting equation is Assets = Liabilities + Stockholders' Equity. When a company receives a utility bill of $690 and does not pay it, it creates an obligation (liability) and an expense. Expenses reduce stockholders' equity.

Step2: Determine the change in assets

There is no immediate change in assets as a result of just receiving the utility bill and not paying it. So, the change in assets is $0$.

Step3: Determine the change in liabilities

The company now owes $690 for the utility bill, so liabilities increase by $690$.

Step4: Determine the change in stockholders' equity

Since the utility expense is recognized, stockholders' equity decreases by $690$ (because expenses reduce net - income which in turn reduces retained earnings and thus stockholders' equity).

Answer:

Assets: $0$
Liabilities: $690$
Stockholders' Equity: $- 690$