Question

On September 11, we performed $5,750 of service and billed our customer. What account would we debit when we journalize this entry?

1) Accounts Receivable
2) Service Revenue
3) Cash
4) Accounts Payable

Answer 1

The correct account to debit when a company performs a service and bills the customer is Accounts Receivable. This accounts for the customer's obligation to pay while the Service Revenue account is credited to record the income

Step-by-step explanation:

When a company performs a service and bills the customer, the correct journal entry involves debiting Accounts Receivable and crediting Service Revenue. This is because the company has earned revenue by providing the service, which increases the balance in the Service Revenue account, and has not yet received cash, so the customer's obligation to pay is recorded in Accounts Receivable.

The Service Revenue account is not debited because it represents the income earned, which increases through a credit. Cash is not debited because it has not been received; this transaction represents a promise to pay, rather than an immediate cash payment. Lastly, Accounts Payable is not affected in this transaction as it typically records the company's obligation to pay others, not the customer's obligation to pay the company.

Example Journal Entry

1. Debit: Accounts Receivable $5,750
2. Credit: Service Revenue $5,750