Question

Chimney Sweeps provided chimney cleaning services to several clients during the month of February. Chimney's customers have not yet been billed. Chimney's customers owe $2,000 to Chimney. How will Chimney Sweeps record this transaction?
a. Debit accounts receivable and credit cash
b. Debit cash and credit services revenue
c. Debit accounts receivable and credit services revenue

Answer 1

Answer:

The answer is: letter C, Debit accounts receivable and credit services revenue.

Explanation:

For a business to thrive well financially, it becomes essential to keep a record of its financial transactions. This process is what you call "bookkeeping."

Bookkeeping ensures that books are well-balanced. In order to do this, it follows a "double-entry system." This means you have to put a debit entry which will be corresponded by a credit entry.

In the case above, the Chimney Sweeps has already provided the chimney cleaning service but the customers haven't paid yet. This means, you have to "debit accounts receivable." The accounts receivable on the debit side is a claim for payment of the cleaning service you have rendered. In order to balance this, you have to "credit services revenue." Since you have already provided the service and it is deemed to increase your revenue, then it will be considered a part of your equity.