Question

Coaster Brothers, Inc. billed a client for services performed on March 12. The customer paid one-half of the amount owed on March 22 and the other one-half on April 24. When should the company record the related Service Revenue?
A. On March 12.
B. On March 22.
C. One-half on March 22 and the other half on April 24.
D. At year-end in an adjusting entry.

Answer 1

Answer:

A. On March 12

Explanation:

The accounting  entry that would have been processed by Coaster Brothers Inc on March 12  would be

Accounts Receivable   Debit  

Service Revenue                        Credit

This would have been processed on March 12 since the services were performed.

The other options such as options B and C represent collection dates of the accounts receivable and would only involve the cash and receivable accounts.

Tear end adjusting entries are only recorded if there is an unbilled services or billed services in advance.