You work for a company that ends their fiscal year on September 30th. The company billed its customers for services provided in August, but

You work for a company that ends their fiscal year on September 30th. The company billed its customers for services provided in August, but they have not yet received payment for these services. Assuming the company uses accrual accounting, how should this transaction be recorded

0 thoughts on “You work for a company that ends their fiscal year on September 30th. The company billed its customers for services provided in August, but”

  1. Answer:

    Debit Accounts receivable

    Credit Service Revenue

    Being entries for services rendered to customers in August

    Explanation:

    Under accrual accounting, revenue is recognized once it is earned which is when the goods or services have been delivered to the customers such that the risk and reward or control of the goods/services now lies with the customer.

    This is different from the cash basis of accounting where revenue is only recognized when cash has been received.

    In accrual accounting, When revenue is earned but cash is yet to be received,

    Debit Accounts receivable

    Credit Revenue account

    On receipt of cash,

    Debit Cash account  

    Credit Accounts receivable.

    Reply

Leave a Comment

− three = seven