Question

Collette is the owner of a small motel who keeps her own financial records. She needs to record the income from room sales for the day. All of today's income was from a single group, and the group's representative paid the bill on account. The accounts that this income affects are:_________.

Answer 1

The income Collette recorded from room sales affects the Accounts Receivable and Revenue accounts. She debits Accounts Receivable and credits Revenue to reflect the credit transaction for room sales on accrual basis accounting.

Step-by-step explanation:

When Collette, the owner of a small motel, records her income from room sales for the day, the accounts affected are typically the Accounts Receivable and the Revenue accounts. Since the representative of the group paid on account, this means that the payment has been made on credit and no cash has been received yet. Therefore, Collette would debit the Accounts Receivable to increase the asset account, which represents the amount owed to her by the group, and credit the Revenue account to reflect the income earned from the room sales. This transaction illustrates the accrual basis of accounting where income is recorded when earned, not necessarily when cash is received. So, her journal entry would involve an increase in Accounts Receivable and an increase in Revenue.