In late August, a company provided one of its customers with services worth $500; however, the company does not expect payment from the customer for those services until early September. What adjustment should the company make in August to denote this delivery of services?

A : The company should decrease both Accounts Receivable and Service Revenue for $500.

B : The company should decrease Accounts Receivable for $500 and increase Service Revenue for $500.

C : The company should increase both Accounts Receivable and Service Revenue for $500.

D : The company should increase Accounts Receivable for $500 and decrease Service Revenue for $500.

Question

Guest

Business

29 May, 07:16

In late August, a company provided one of its customers with services worth $500; however, the company does not expect payment from the customer for those services until early September. What adjustment should the company make in August to denote this delivery of services?

A : The company should decrease both Accounts Receivable and Service Revenue for $500.

B : The company should decrease Accounts Receivable for $500 and increase Service Revenue for $500.

C : The company should increase both Accounts Receivable and Service Revenue for $500.

D : The company should increase Accounts Receivable for $500 and decrease Service Revenue for $500.

+2

Answers (1)

Know the Answer?

Giancarlo Potter · Answer 1

The answer is: C) The company should increase both Accounts Receivable and Service Revenue for $500.

Explanation:

When you want to record an entry for a sale on account (the sale was made on August and should be paid in September), you must debit Accounts Receivable and credit Service Revenue.

When assets increase (accounts receivable), then you should entry a debit. When revenue increases (service revenue), then you should entry a credit.