Sugar,Inc.made an adjusting entry on December 31 to record $580 of revenues earned but not yet collected.Which of the following describes the adjusting entry?
A)Cash should be decreased by $580 and Sales Revenue should be increased by $580.
B)Deferred Revenue should be increased by $580 and Sales Revenue should be decreased by $580.
C)Accounts Receivable should be increased by $580 and Sales Revenue should be increased by $580.
D)Accounts Receivable should be increased by $580 and Deferred Revenue should be increased by $580.

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 by $580 (with a debit)and increase the related revenue account by $580 (with a credit).

Sugar,IncMade an Adjusting Entry on December 31 to Record $580