When will Accounts Receivable be involved in an adjusting entry?
A)Revenues are earned but have not been collected or recorded at the end of the period.
B)Cash is collected in advance of the revenue earned at the end of the period.
C)Revenue from cash collected earlier in the period has been earned at the end of the period.
D)Accounts Receivable will never be used in an adjusting entry.It is only used in daily transactions.

Question

Quizplus · Accepted Answer

Companies that provide accounting,legal,or promotional services that span more than one month are unlikely to receive cash or bill customers until the services have been provided in full.The revenue recognition principle indicates they should be recorded during the period earned.Thus,an accrual adjustment is needed to increase Accounts Receivable on the balance sheet and increase the related revenue account on the income statement.

When Will Accounts Receivable Be Involved in an Adjusting Entry