Question

Mary Richardo has performed $500 of CPA services for a client but has not billed the client as of the end of the accounting period. What adjusting entry must Mary make?

A) Debit Cash and credit Unearned Service Revenue

B) Debit Accounts Receivable and credit Unearned Service Revenue

C) Debit Accounts Receivable and credit Service Revenue

D) Debit Unearned Service Revenue and credit Service Revenue

Answer 1

Mary Richardo must make an adjusting entry of Debit Accounts Receivable and credit Service Revenue for the CPA services performed to reflect earned income and the expectation of future payment.

Step-by-step explanation:

The correct adjusting entry that Mary Richardo must make for performing $500 of CPA services, even though she has not billed the client by the end of the accounting period, is Debit Accounts Receivable and credit Service Revenue. This is because the services have been performed but not yet billed, and thus, Mary has earned the revenue and has a claim to receive cash in the future. The accounts receivable account increases with a debit indicating that a client owes money to Mary, and the service revenue account increases with a credit because it reflects the income that has been earned.

The entry would be:

Debit Accounts Receivable $500

Credit Service Revenue $500