Question

On December 31, the end of the accounting period, $10,600 in service fees had been earned but not billed or received. The Watson Company uses the account Fees Receivable to reflect amounts due but not yet billed.

Answer 1

Answer:

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On December 31, the end of the accounting period, $10,600 in service fees had been earned but not billed or received. The Watson Company uses the account Fees Receivable to reflect amounts due but not yet billed.

The proper adjusting entry would be:

The correct adjusting entry to reflect the transaction in the account is a s follows:

Dr  Account fees receivable          $10,6000

Cr Fees income account                                  $10,600

Explanation:

According to international accounting best practice such as U.S GAAP and International Financial Reporting Standards, revenue is recognized when it is earned not when cash has been received.

As a result, since the $10,600 is already earned, it should be recognized in revenue by  a way of adjusting entry, with a credit posted to fees income to show increase in revenue and  debit in account fees income to show an increase customers' indebtedness to Watson company.

It must be reflected in the two accounts owing to duality concept of accounting