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

3. Accrual Accounting Concepts

Adjusting Entries: Accrued Revenues

Financial Accounting

3. Accrual Accounting Concepts

Adjusting Entries: Accrued Revenues

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Multiple Choice

Wang Company has earned $2,000 in service revenue at year-end that has not yet been billed or recorded. Which adjusting entry should Wang Company make to recognize this accrued revenue?

Debit Cash $2,000; Credit Service Revenue $2,000

Debit Service Revenue $2,000; Credit Accounts Receivable $2,000

Debit Accounts Receivable $2,000; Credit Service Revenue $2,000

Debit Service Revenue $2,000; Credit Cash $2,000

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Verified step by step guidance

Step 1: Understand the concept of accrued revenue. Accrued revenue refers to income earned but not yet billed or recorded in the accounting system. It is recognized as revenue in the current period even though cash has not been received.

Step 2: Identify the accounts involved. Since Wang Company has earned service revenue but has not yet billed or received payment, the accounts affected are 'Accounts Receivable' (an asset account) and 'Service Revenue' (a revenue account).

Step 3: Determine the correct adjusting entry. To record accrued revenue, you need to increase (debit) 'Accounts Receivable' to reflect the amount owed to the company and increase (credit) 'Service Revenue' to recognize the revenue earned.

Step 4: Write the journal entry. The adjusting entry will be: Debit Accounts Receivable $2,000; Credit Service Revenue $2,000. This ensures that the revenue is recognized in the correct accounting period and the receivable is recorded as an asset.

Step 5: Verify the impact of the entry. Debiting 'Accounts Receivable' increases assets, while crediting 'Service Revenue' increases equity through revenue recognition. This aligns with the accrual basis of accounting, which records revenues when earned, regardless of cash receipt.