A company receives payment from one of its customers on August 5 for services performed on July 21.

Which of the following entries would be recorded if the company uses accrual basis accounting?

A

Cash

1000

Accounts Receivable

1,000

B

Accounts Payable

1000

Cash

1,000

C

Cash

1000

Service Revenue

1,000

D

Service Revenue

1000

Cash

1,000

Option A is the correct answer ,debit cash with $1000 and credit accounts receivable with the same amount.

Explanation:

Since the company uses accrual basis of accounting,which implies that revenue is recognized when earned not when cash is received.

Besides,revenue would have been recorded earlier by debiting accounts receivable and crediting revenue,which means that the receipt of cash now has no entry in revenue since revenue has been recorded previously.

The cash receipt would have impact in cash account as an increase and a debit as well as accounts receivable as a decrease and a credit.

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