Question

Dr. Davidson's medical practice uses accrual accounting and issues monthly financial statements. On October 15, 2020, the medical practice bills patients for services provided during October 2020. Patients pay their bills on October 18, 2020. What entry will the medical practice prepare on October 18, 2020?

Group of answer choices

Increase Cash and decrease Accounts Receivable

Increase Cash and decrease Revenue

Decrease Unearned Revenue and increase Revenue

Increase Accounts Receivable and increase Revenue

Answer 1

CORRECT ANSWER IS OPTION A i.e. INCREASE CASH AND DECREASE ACCOUNTS RECEIVABLE

Dr. Davidson's uses accrual accounting concept which means that incomes and expenses are recorded as and when they are incurred.

Therefore entry on October 15,2020 will be :

Accounts Receivable A/c ................Dr.

                           To Revenue A/c

On October 18,2020 Dr. Davidson's receives the payment.

Therefore entry on October18,2020 will be :

Cash A/c..................................Dr.

    To Accounts Receivable A/c