A consultant performs accounting services for a client on 30 June 2016 and bills the client $350,to be paid within 60 days.Payment is received on 15 August 2016.Accrual accounting is used by both parties.
- What is the journal entry made by the consultant on 15 August 2016?

Question

Quizplus · Accepted Answer

Under accrual accounting, revenue is recognized when earned, not when received. Therefore, on 30 June 2016, the consultant would have recorded the revenue (Dr Accounts Receivable, Cr Service Revenue). On 15 August 2016, when payment is received, the entry is to increase cash (Dr Cash) and decrease accounts receivable (Cr Accounts Receivable), reflecting the receipt of payment for the previously recognized revenue.

A Consultant Performs Accounting Services for a Client on 30