In this scenario, Sam's lawn service incurred a $500 labor expense, which represents a cost incurred by the company for labor services. Since the company has promised to pay the labor agency within 30 days but has not yet made the payment, this will create a liability for the company.
The account that increased as a result of this transaction is the "Accounts Payable" account, which is a liability. It reflects the amount owed to the labor agency. The corresponding expense account, "Labor Expense," also increased by $500.
To summarize:
- Increased account: Accounts Payable (liability)
- Corresponding expense account: Labor Expense (expense)
1 answer