knowledge check 01\non january 31, jean consulting company receives a bill for that month’s utilities in the…

knowledge check 01\non january 31, jean consulting company receives a bill for that month’s utilities in the amount of $500. jean sets it aside because she does not plan to pay the bill until its due date of february 15. what effect, if any, does this event have on the company’s accounting equation as of january 31?\n\nthe business must record this event, which would decrease cash and decrease equity on january 31.\nthe business must record this event, which would decrease cash and increase equity on january 31.\nthe business must record this event, which would increase liabilities and decrease equity on january 31.\nbecause the bill is set aside for payment in february, there would be no effect on the accounting equation as of january 31.

knowledge check 01\non january 31, jean consulting company receives a bill for that month’s utilities in the amount of $500. jean sets it aside because she does not plan to pay the bill until its due date of february 15. what effect, if any, does this event have on the company’s accounting equation as of january 31?\n\nthe business must record this event, which would decrease cash and decrease equity on january 31.\nthe business must record this event, which would decrease cash and increase equity on january 31.\nthe business must record this event, which would increase liabilities and decrease equity on january 31.\nbecause the bill is set aside for payment in february, there would be no effect on the accounting equation as of january 31.

Answer

Brief Explanations:

When the company receives a utility bill of $500 on January 31, it has an obligation to pay in the future. This creates a liability (accounts payable) and since utilities are an expense, it decreases equity (through retained earnings as expenses reduce net - income which affects equity). Cash is not affected yet as the payment is due in February.

Answer:

The business must record this event, which would increase liabilities and decrease equity on January 31.