Question

Company provides services to customers totaling $2,400, for which it billed the customers. How would the transaction be recorded?

a) Debit accounts receivable $2,400, credit service revenue $2,400.
b) Debit cash $2,400, credit service revenue $2,400.
c) Debit service revenue $2,400, credit accounts receivable $2,400.
d) Debit accounts receivable $2,400, credit cash $2,400.

Answer 1

The transaction would be recorded by debiting accounts receivable and crediting service revenue.

Step-by-step explanation:

The correct recording of the transaction would be option a) Debit accounts receivable $2,400, credit service revenue $2,400.

When the company provides services to customers and bills them, it creates an account receivable. This is an asset account that represents the amount the customers owe the company. Therefore, you would debit accounts receivable (increase in asset) for $2,400.

At the same time, you would credit service revenue (increase in revenue) for $2,400 to show the revenue earned from providing the services to the customers.