Tom See has performed $4000 of CPA services for a client but has not billed the client as of the end of the accounting period. What adjusting entry must Tom make?
A) Debit Cash and credit Unearned Service Revenue
B) Debit Accounts Receivable and credit Unearned Service Revenue
C) Debit Accounts Receivable and credit Service Revenue
D) Debit Unearned Service Revenue and credit Service Revenue

Question

Quizplus · Accepted Answer

Tom See has performed the services but has not yet received payment, so he needs to recognize the revenue earned. The correct adjusting entry is to debit Accounts Receivable, indicating that the client now owes money for services rendered, and credit Service Revenue, recognizing the revenue earned from these services. This follows the accrual basis of accounting, where revenues are recognized when earned, regardless of when cash is received.

Tom See Has Performed $4000 of CPA Services for a Client