Question

You work for a company that ends their fiscal year on September 30th. The company billed...

You work for a company that ends their fiscal year on September 30th. The company billed its customers for services provided in August, but they have not yet received payment for these services. Assuming the company uses accrual accounting, how should this transaction be recorded?

A. Increase unearned revenue

B. Increase service revenue

C. Decrease accounts receivable

D. Decrease unearned revenue

Business   Accounting   
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Answer #1
Correct Option B i.e. Increase service revenue
Reason: When a customer is billed then Accounts receivable is Debited and Service Revenue is Credited. Which means both accounts receivable and service revenue gets increased.
Why Other Options are incorrect:
Option A: Unearned Revenue is increased when any advance is received from customer for service to be provided.
Option C: Accounts receivable is decreased when cash is collected from customer.
Option D: Unearned revenue is decreased when service is provided to customer against which cash was received earlier.
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