Multiple Choice
When accounting for accrued revenues, how should changes in estimated option forfeitures be recognized?
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3. Accrual Accounting Concepts
Adjusting Entries: Accrued Revenues
Multiple Choice
In an adjusting entry for accrued revenues (services provided but not yet billed or collected), which balance sheet account is increased?
A
Common stock
B
Accounts receivable
C
Unearned revenue
D
Accounts payable
Verified step by step guidance1
Understand that accrued revenues refer to revenues earned by providing services or delivering goods, but for which payment has not yet been received or billed by the end of the accounting period.
Recognize that since the revenue has been earned but not yet collected, the company has a right to receive payment in the future, which is recorded as an asset on the balance sheet.
Identify that the asset account representing amounts owed to the company by customers is called 'Accounts Receivable'.
In the adjusting entry, increase (debit) the 'Accounts Receivable' account to reflect the amount earned but not yet received.
Simultaneously, increase (credit) the revenue account on the income statement to recognize the earned revenue in the current period.
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