Tuesday, November 10th, 2009

The journal entry to record the sale of services on credit should include:?

A) a debit to Accounts Receivable and a credit to Capital.
B) a debit to Cash and a credit to Accounts Receivable
C) a debit to Fees Income and a credit to Accounts Receivable.
D) a debit to Accounts Receivable and a credit to Fees Income.

This is an accounting question on journal entries:

I have narrowed it down to A or D, leaning towards A. Could use some guidance, not sure where to find what i am looking for to help answer this question.

For all the answers given, D) is the best option. if you provide a service on credit, account receivable has to be debited and you then credit the corresponding account and in this case because you are providing service, you charge fees thus, you credit fees income.

to comment on the rest of the options:
A = you definately cannot credit capital if you provide service on credit. that makes this option wrong.
B = the service was provided on credit so you cannot debit cash and it is wrong to credit account receivable.
C = it is wrong to debit fees income, just like turnover of a company, when you provide a service, you rather credit it and and it is wrong to credit account receivable.

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2 Responses to “The journal entry to record the sale of services on credit should include:?”

Dennis Says:
November 10th, 2009 at 9:49 am

A is correct!
References :

Anthony Says:
November 10th, 2009 at 10:05 am

For all the answers given, D) is the best option. if you provide a service on credit, account receivable has to be debited and you then credit the corresponding account and in this case because you are providing service, you charge fees thus, you credit fees income.

to comment on the rest of the options:
A = you definately cannot credit capital if you provide service on credit. that makes this option wrong.
B = the service was provided on credit so you cannot debit cash and it is wrong to credit account receivable.
C = it is wrong to debit fees income, just like turnover of a company, when you provide a service, you rather credit it and and it is wrong to credit account receivable.
References :

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