Question

On December 27, a business completed a $400 service that had not yet been billed or recorded as of December 31. Demonstrate the required adjusting entry of the business by completing the following sentence. The required adjusting entry would be to debit the ___________ (Unearned revenue / Accounts receivable / Cash / Service revenue) account and __________ (debit / credit) the ___________ (Unearned revenue / Accounts receivable / Cash / Service revenue) account.

Answer 1

Answer:

Dr Trade Receivables $400

Cr             Service Revenue $400

Explanation:

According to accrual accounting system, once the share of consideration from the part of company is delivered the company must recognize sales. As the company has not been billed for its services, which means the customer has not yet paid so the receivable account would be debited and the company must also recognize revenue because it has delivered its share.

Increase in revenue must be credited and increase in receivables must be debited.

Dr Trade Receivables $400

Cr             Service Revenue $400