Your company received payment last month for a service that you provided this month. How will the business activity of the current month affect the basic accounting equation?

Multiple Choice

• Assets (Cash) will increase, liabilities will not change, and Shareholders' equity (Service Revenue) will increase.

• Assets will not change; liabilities (Deferred Revenue) will decrease; and Shareholders' equity (Service Revenue) will increase.

• Assets (Cash) will increase, liabilities (Deferred Revenue) will increase, and Shareholders' equity will not change.

• Assets (Prepaid Expenses) will decrease, liabilities will not change, and Shareholders' equity (Service Revenue) will increase.