Final answer:
When Pizza Company delivers pizza to customers and bills its customer accounts, it should record a debit to Accounts Receivable and a credit to Sales Revenue. Accounts Receivable is an asset account that reflects amounts owed to the company by its customers.
Step-by-step explanation:
When Pizza Company delivers pizza to customers and bills its customer accounts, it should record a debit to Accounts Receivable and a credit to Sales Revenue. This represents the increase in the amount customers owe to Pizza Company for the pizzas delivered. Accounts Receivable is an asset account that reflects amounts owed to the company by its customers. This represents the revenue earned by Pizza Company for delivering pizzas to customers. Service Revenue (or a similar account, such as Sales Revenue) is a revenue account that reflects the company's earnings from providing services or selling goods.
In summary, the transaction recognizes the increase in the company's accounts receivable (an asset) and the recognition of service revenue (an increase in equity). Accounts Receivable is an asset account that reflects amounts owed to the company by its customers. This accounting entry follows the revenue recognition principle, which dictates that revenue should be recognized when it is earned, and the company has a right to receive payment.