Question

A company has earned revenue from selling a product but has not yet received the payment in cash. Which

of the following statements is true regarding the adjusting entry needed to record this accrual?
a. The entry requires a credit to Accounts Receivable.
b. The entry requires a debit to Unearned Revenue.
c. The entry requires a debit to Sales Revenue.
d. The entry requires a credit to Sales Revenue.
e. The entry requires a credit to Unearned Revenue.

Answer 1

The correct adjusting entry for a company that has earned revenue but not yet received cash is to debit Accounts Receivable and credit Sales Revenue, per accrual accounting principles.

Step-by-step explanation:

If a company has earned revenue from selling a product but has not yet received the payment in cash, the correct adjusting entry to record this accrual would involve a debit to Accounts Receivable and a credit to Sales Revenue. This reflects that the company has the right to receive cash for the sale made, which increases Accounts Receivable, an asset account. Simultaneously, recognizing the revenue earned for the sale of the product increases the Sales Revenue account, which is recorded on the credit side in accordance with the accrual basis of accounting.