Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

2. Transaction Analysis

Journal Entries: Debits and Credits

Financial Accounting

2. Transaction Analysis

Journal Entries: Debits and Credits

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Multiple Choice

Mason Company provided the following data for this year: Service Revenue earned was \$50,000, Cash collected from customers was \$45,000, and Accounts Receivable increased by \$5,000. Which of the following is the correct journal entry to record the service revenue earned for the year?

Debit Accounts Receivable \$50,000; Credit Service Revenue \$50,000

Debit Service Revenue \$50,000; Credit Cash \$45,000; Credit Accounts Receivable \$5,000

Debit Cash \$50,000; Credit Service Revenue \$50,000

Debit Accounts Receivable \$5,000; Debit Cash \$45,000; Credit Service Revenue \$50,000

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Verified step by step guidance

Step 1: Understand the concept of revenue recognition. Revenue is recognized when it is earned, not necessarily when cash is collected. In this case, Mason Company earned $50,000 in service revenue during the year, regardless of the cash collected.

Step 2: Analyze the data provided. Service Revenue earned is $50,000, Cash collected from customers is $45,000, and Accounts Receivable increased by $5,000. The increase in Accounts Receivable indicates that some of the revenue earned has not yet been collected in cash.

Step 3: Determine the journal entry components. To record the service revenue earned, you need to credit Service Revenue for $50,000 (to reflect the revenue earned). Since $45,000 was collected in cash, you debit Cash for $45,000. The remaining $5,000, which is the increase in Accounts Receivable, is debited to Accounts Receivable.

Step 4: Write the journal entry. The correct journal entry is: Debit Accounts Receivable $5,000, Debit Cash $45,000, Credit Service Revenue $50,000. This entry reflects the total revenue earned, the cash collected, and the increase in Accounts Receivable.

Step 5: Verify the journal entry. Ensure that the debits equal the credits ($5,000 + $45,000 = $50,000), and confirm that the entry accurately reflects the revenue earned, cash collected, and the change in Accounts Receivable.