Question

Which of the following is true about the adjusting entry to record the revenue for which the seller has performed its obligations but not yet collected? (Select all that apply.)

a) Increases assets
b) Decreases liabilities
c) Recognizes revenue
d) Reflects the passage of time

Answer 1

The adjusting entry to record revenue for which the seller has performed its obligations but not yet collected increases assets and recognizes revenue.

Step-by-step explanation:

The adjusting entry to record the revenue for which the seller has performed its obligations but not yet collected has the following characteristics:

1. Increases assets: This is true because the seller has performed its obligations and is entitled to receive payment, which is recorded as an increase in the accounts receivable asset.
2. Does not decrease liabilities: This is false because the seller is still owed the payment and has a claim against the buyer, which is recorded as an increase in the accounts receivable asset, not a decrease in liabilities.
3. Recognizes revenue: This is true because the seller has performed its obligations, and revenue is recognized when the earnings process is complete, even if payment has not been received yet.
4. Reflects the passage of time: This is false because the adjusting entry to record the revenue for which the seller has performed its obligations but not yet collected is based on the completion of the earnings process, not the passage of time.