If Houston Company billed a client for $10,000 of consulting work completed, the accounts receivable asset increases by $10,000 and:
A) Accounts payable increases $10,000.
B) Revenue decreases $10,000
C) Accounts payable decreases $10,000.
D) Cash increases $10,000.
E) Revenue increases $10,000.

Question

Quizplus · Accepted Answer

When a company bills a client for $10,000 of consulting work completed, the revenue increases by $10,000, since the company has earned $10,000 through its consulting services. This is recognized under the accrual accounting method in which revenue is recorded at the time of earning, not when cash is received. Therefore, options A and D can be excluded as they do not make sense in this scenario. Option B is incorrect because billing for work completed increases revenue, not decreases it. Option C is also incorrect as there is no discussion about accounts payable in this transaction. Therefore, the correct choice is E, revenue increases $10,000.

If Houston Company Billed a Client for $10,000 of Consulting