A company provides services to customers on account for $2,300. Indicate the amount of increases and decreases in the accounting equation.

Question

Libby Cohen

Business

24 June, 16:54

A company provides services to customers on account for $2,300. Indicate the amount of increases and decreases in the accounting equation.

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Answers (1)

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Alyvia Zavala · Answer 1

The correct answer is: A debit for $2,300 to accounts receivable (increase) and a credit for $2,300 to service revenue (decrease).

Explanation:

Services on account are given when an entity provides a service but the payment is invoiced to the customer at a later date. In the entity's book, there must be recorded a debit to accounts receivable for the amount for the service and a credit to service revenue for the same value.

Thus, if a company services customers on account for $2,300, in the general ledger a debit for $2,300 must be recorded to accounts receivable (increase) and a credit for $2,300 should be booked to service revenue (decrease).