Question

In late August, a company provided one of its customers with services worth $500; however, the company does not expect payment from the customer for those services until early September. What adjustment should the company make in August to denote this delivery of services?

A : The company should decrease both Accounts Receivable and Service Revenue for $500.
B : The company should decrease Accounts Receivable for $500 and increase Service Revenue for $500.
C : The company should increase both Accounts Receivable and Service Revenue for $500.
D : The company should increase Accounts Receivable for $500 and decrease Service Revenue for $500.

Answer 1

The answer is: C) The company should increase both Accounts Receivable and Service Revenue for $500.

Step-by-step explanation:

When you want to record an entry for a sale on account (the sale was made on August and should be paid in September), you must debit Accounts Receivable and credit Service Revenue.

• When assets increase (accounts receivable), then you should entry a debit.
• When revenue increases (service revenue), then you should entry a credit.