Question

Kostner Financial Services, Inc. performed accounting services for a client in A bill was mailed to the client on December 30. The company received the client's check by mail on January 5. Which of the following accounts should appear on the income statement for the year ended December 31 as related to the services performed?
A) Accounts Payable
B) Prepaid Expense
C) Unearned Revenue
D) Service Revenue

Answer 1

Answer:

D) Service Revenue

Explanation:

By the end of the year the service has already been completed and revenue cannot be said to be unearned, hence it has to be recorded as service revenue since the firm in question is a service firm.

The scenario does not talk about expenses hence this is not a prepaid expense neither is it an accounts payable as the firm has not been served by the client but the firm has served the client.

Answer 2

Answer:

D) Service Revenue

Explanation:

An unearned revenue is the revenue which is generated before the services are even given to the client. It can also be called as deferred revenue. Hence the answer to this question can not be Unearned Revenue. The other two options (A & B) are also not applicable here.

Hence, it is clear that the revenue generated but yet not received will be known as the Service Revenue in the income statement.

Good Luck buddy.