Doug's Doodle Shop, specializing in dog supplies, signs a contract with a pet groomer. Next month, the groomer will begin leasing a portion of Doug's store and provide grooming services. The signing of the contract: Multiple Choice has no effect on the accounting equation. increases assets. increases liabilities.

To analyze the effects of signing a contract on the accounting equation, we need to consider the implications of the contract itself. 1. **Understanding the Accounting Equation**: The accounting equation is represented as: \[ \text{Assets} = \text{Liabilities} + \text{Equity} \] 2. **Effects of Signing the Contract**: - **Assets**: The contract itself does not immediately increase or decrease assets. However, if the groomer begins to lease space, Doug's Doodle Shop may receive rental income, which could increase cash (an asset) in the future. - **Liabilities**: Signing a contract does not create a liability unless there is a specific obligation that requires payment or a future outflow of resources. In this case, the contract is an agreement for services and does not inherently create a liability. - **Equity**: The signing of the contract does not directly affect equity either. 3. **Conclusion**: Since the signing of the contract does not immediately affect assets or liabilities, the correct answer is that it has no effect on the accounting equation. Therefore, the answer is: - **has no effect on the accounting equation.**