An accountant has billed her clients for services performed in October. In November, she receives payments from her clients. What entry will she make upon receipt of the payments?

Question

Quizplus · Accepted Answer

When the accountant receives payments from her clients, it means that the clients are paying off their outstanding balances. Therefore, the accountant will debit cash (to increase the cash account since cash is coming in) and credit accounts receivable (to decrease the accounts receivable since the clients' debts are being paid off). This entry reflects the receipt of cash in exchange for the services previously billed, not the earning of new revenue or the adjustment of previously recognized revenue.

An Accountant Has Billed Her Clients for Services Performed in October