When a customer buys services on account,it should be recorded by the company as:
A)a debit to Cash and a credit to Accounts Receivable.
B)a debit to Accounts Receivable and a credit to Revenue.
C)a debit to Services and a credit to Unearned Revenue.
D)a debit to Cash and a credit to Accounts Payable.

Question

Quizplus · Accepted Answer

When a customer buys services on account, it means that they haven't paid for the services yet but have promised to pay in the future. This is recorded as a debit to Accounts Receivable (an asset account representing the amount owed to the company by the customer) and a credit to Revenue (an income account representing the revenue earned by the company from the provision of services). Option B represents this transaction. Option A is incorrect because the company hasn't received cash yet. Option C is incorrect because unearned revenue represents payments received in advance for services that haven't been provided yet. Option D is incorrect because it records a payment made by the company, while the scenario described in the question is about a customer buying services on account (i.e., not making a payment yet).

When a Customer Buys Services on Account,it Should Be Recorded