When the customer receives the invoice for 1,000,000 Rwf, what is the impact on the accounting equation?

                                          +1,000,000                      -1,000,000

On the date the customer receives the invoice, the company has to recognize the expense (decrease to equity).  However, it has not yet paid cash, instead it has an account payable (liability) since it owes money to the creditor. 

Qs: What is the impact on the accounting equation?

When the invoice is received (or previously if the goods/services were received in advance) the expense is incurred but cash has not yet been paid. We need to recognize a liability as we have a legal obligation to pay the company.

We increase service expense (expense/equity), so we debit

We increase accounts payable (liability), so we credit

Qs: What are the associated journal entries?

Service expense or accounting expense

It is now the end of February and the customer makes a cash payment for the invoice of 1,000,000 Rwf.  What is the impact on the accounting equation?

                       -1,000,000               -1,000,000

The customer makes a cash payment (asset) and no longer has an account payable (liability). There is no impact on equity in February because the expense was recognized in January.

Qs: What is the impact on the accounting equation?

Again, there is no impact on equity at this point as the liability was previously recognized. We are now reducing a liability by giving up an asset.

We decrease accounts payable (liability), so we debit

We decrease cash (asset), so we credit

At the end of February, the accounts payable balance is now 0.

Qs: What is the related journal entry?