Final Answer:
The adjusting entry needed to record the accrual for revenue earned but not yet received in cash is to debit Accounts Receivable and credit Revenue.
Step-by-step explanation:
In accrual accounting, revenue is recognized when it is earned, regardless of when the cash is received. When a company has earned revenue but has not yet received payment in cash, it needs to make an adjusting entry to reflect this accrual. The adjusting entry involves debiting the Accounts Receivable (an asset account) and crediting Revenue (an income statement account).
For instance, if a company provided services worth $1,000 but has not received the cash, the adjusting entry would be to debit Accounts Receivable by $1,000 and credit Revenue by $1,000. This entry ensures that the company's financial statements accurately reflect the revenue earned during the period, even if the cash has not been collected.
This adjusting entry aligns with the revenue recognition principle, which emphasizes recognizing revenue when it is earned, irrespective of the timing of cash receipts. It allows for a more accurate representation of a company's financial performance and obligations in a given accounting period. The debit to Accounts Receivable reflects the amount customers owe, while the credit to Revenue recognizes the revenue earned during the period.