Multiple Choice
Which of the following situations would most likely require an adjusting entry for accrued revenues at the end of an accounting period?
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3. Accrual Accounting Concepts
Adjusting Entries: Accrued Revenues
Multiple Choice
Which of the following journal entries records the adjustment for revenue that has been earned but not yet collected at the end of the accounting period?
A
Debit Service Revenue; Credit Accounts Receivable
B
Debit Unearned Revenue; Credit Service Revenue
C
Debit Cash; Credit Unearned Revenue
D
Debit Accounts Receivable; Credit Service Revenue
Verified step by step guidance1
Understand the concept of accrued revenue: Accrued revenue refers to revenue that has been earned but not yet received in cash or recorded in the accounts. This adjustment ensures that revenue is recognized in the period it is earned, following the accrual basis of accounting.
Identify the accounts involved: Since the revenue has been earned but not yet collected, the accounts affected are 'Accounts Receivable' (an asset account) and 'Service Revenue' (a revenue account).
Determine the impact on each account: Revenue earned increases 'Service Revenue,' which is credited. The amount owed by customers increases 'Accounts Receivable,' which is debited.
Write the journal entry: The adjustment for accrued revenue is recorded as a debit to 'Accounts Receivable' and a credit to 'Service Revenue.' This reflects the earned revenue and the receivable amount.
Review the options provided: Compare the journal entry you determined with the options given in the problem. The correct entry is 'Debit Accounts Receivable; Credit Service Revenue,' as it properly records the adjustment for accrued revenue.
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