When Harmony Inc.performs $1,000 of services on account for a customer,Harmony will record a journal entry with a debit to:
A) Cash and a credit to Accounts Receivable.
B) Accounts Receivable and a credit to Service Revenue.
C) Service Revenue and a credit to Unearned Revenue.
D) Cash and a credit to Accounts Payable.

Question

Quizplus · Accepted Answer

When Harmony Inc. performs services on account, it means that they have provided services to a customer and the payment for those services will be made at a later date. Therefore, accounts receivable, which represents the amount owed to Harmony by the customer, will increase (debit) and the revenue earned by Harmony from providing the services will also increase (credit to service revenue). Option A is incorrect as cash is not received, and option C is incorrect as unearned revenue represents revenue collected before the services are provided. Option D is incorrect as accounts payable represents the amount owed by Harmony to its suppliers, not by its customers.