Question

suppose your work summers mowign yards. most of your customer pay you immediately after their lawn is mowed, but a few customers ask you to bill them at the end of the month. It is now October 31, and you collected $900 from cash- paying customers for serv ices performed in October. Your remaining customers owe you $750 for services performed in October. How much service revenue would you record in October,according to accrual accounting? Service revenue: Accrual Accounting:

Answer 1

According to Accrual Accounting system, Revenues are to recorded when they are 'earned' and Expenses are recorded when they are 'incurred' whether the cash has been received/paid or not.

This means that actual receipt or payment in cash has nothing much to do with revenue and expense recording and their accounting.

In the given above question, $ 1,650 of Service Revenues have been earned, out of which $ 900 has been received in Cash, while remaining $ 750 is still owed by Accounts receivables.

Answer: Service Revenue as per accrual accounting = $ 1,650
$ 900 received in cash will increase Cash balance,
$ 750 will increase Accounts receivables balance.