Question

A month-end review of work performed during the month at an accounting firm for tax clients indicates there are a total of 50 tax returns completed for which customers owe $196 each. they remain unbilled at the end of the period. the adjusting journal entry should include a

Answer 1

If this were the given choices:

a.debit to Tax Preparation Revenue for $9,800.

b.debit to Cash for $9,800.

c.credit to Tax Preparation Revenue for $9,800.

d.credit to Cash for $9,800.

My answer would be: C. CREDIT TO TAX PREPARATION REVENUE for $9,800

In the above problem, the revenue has already been earned but not yet collected. Thus, its corresponding adjusting entry would be a debit to a receivable account and a credit to an income account.

The receivable account would most likely be Accounts Receivable while the income account is the Tax Preparation Revenue account. The amount $9,800 is derived from 50 tax returns @ $196 each.