Two weeks earlier, a business had rendered services to one of its customers on account for which the payment was received today. Which of the following entries would be recorded if the company uses accrual basis accounting?
A) $$\begin{array} { | c | r | r | }
\hline \text { Cash } & 1,000 & \
\hline \text { Accounts Receivable } & & 1,000 \
\hline
\end{array}$$
B) $$\begin{array} { | c | r | r | }
\hline \text { Salary Expense } & 1,000 & \
\hline \text { Cash } & & 1,000 \
\hline
\end{array}$$
C) $$\begin{array} { | c | r | r | }
\hline \text { Cash } & 1,000 & \
\hline \text { Service Revenue } & & 1,000 \
\hline
\end{array}$$
D) $$\begin{array} { | c | r | r | }
\hline \text { Supplies } & 1,000 & \
\hline \text { Cash } & & 1,000 \
\hline
\end{array}$$

Question

Two weeks earlier, a business had rendered services to one of its customers on account for which the payment was received today. Which of the following entries would be recorded if the company uses accrual basis accounting?
A) $$\begin{array} { | c | r | r | } 
\hline \text { Cash } & 1,000 & \
\hline \text { Accounts Receivable  } & & 1,000 \
\hline
\end{array}$$
B) $$\begin{array} { | c | r | r | } 
\hline \text { Salary Expense } & 1,000 & \
\hline \text { Cash } & & 1,000 \
\hline
\end{array}$$
C) $$\begin{array} { | c | r | r | } 
\hline \text { Cash } & 1,000 & \
\hline \text {  Service Revenue } & & 1,000 \
\hline
\end{array}$$
D) $$\begin{array} { | c | r | r | } 
\hline \text { Supplies } & 1,000 & \
\hline \text { Cash } & & 1,000 \
\hline
\end{array}$$

Quizplus · Accepted Answer

Under accrual basis accounting, revenue is recognized when earned, not when cash is received. The service was rendered earlier, so the revenue was recognized then. The entry now is to record the receipt of cash and reduce accounts receivable.

Two Weeks Earlier, a Business Had Rendered Services to One Cash 1,000 Accounts Receivable 1,000\begin{array} { | c | r | r | } \hline \text { Cash } & 1,000 & \\\hline \text { Accounts Receivable } & & 1,000 \\\hline\end{array} Cash Accounts Receivable ​1,000​1,000​​

Two Weeks Earlier, a Business Had Rendered Services to One $\begin{array} { | c | r | r | } \hline \text { Cash } & 1,000 & \\\hline \text { Accounts Receivable } & & 1,000 \\\hline\end{array}$