Question

Claremore Company received $7,000 as payment from Tulsa Company for a sale made on account in the previous month. Which of the following is the journal entry the company should record? a. Cash 7,000 Accounts Receivable 7,000 b. Cash 7,000 Fees Earned 7,000 C. Accounts Receivable 7,000 Cash 7,000 d. Accounts Receivable 7,000 Fees Earned 7,000

Answer 1

Answer:

a. Cash 7,000 Accounts Receivable 7,000

Explanation:

As for the information provided, the payment is received for a sales made in last month, and thus entry at the time of sales shall be:

Accounts Receivables A/c Dr.  $7,000

                    To Sales                               $7,000

Therefore, when the amount is collected today it will increase cash by debiting cash for the same amount.

Further, balance of accounts receivables will be decreased by crediting such account.

Therefore, correct option is

a. Cash 7,000 Accounts Receivable 7,000