When a service is performed for a customer who has not yet paid, which type of journal entry is required?

When a service is performed for a customer who has not yet paid, which type of journal entry is required?

• A. A Tax Adjustment
• B. A Deferral
• C. A Missing Transaction
• D. An Accrual

Answer: (D)

Recognize revenue when it is earned, not when cash is received. When a service is performed for a customer who hasn’t paid yet, you record an accrual: debit Accounts Receivable to show the amount you expect to collect, and credit Revenue to reflect the income earned in the period. This keeps the revenue aligned with the service actually provided and records the asset until payment arrives. Other options don’t fit because a tax adjustment isn’t about earning revenue, deferrals apply when cash is received before or after the service (unearned revenue or prepaid expenses), and missing transaction isn’t a standard entry type.

Recognize revenue when it is earned, not when cash is received. When a service is performed for a customer who hasn’t paid yet, you record an accrual: debit Accounts Receivable to show the amount you expect to collect, and credit Revenue to reflect the income earned in the period. This keeps the revenue aligned with the service actually provided and records the asset until payment arrives. Other options don’t fit because a tax adjustment isn’t about earning revenue, deferrals apply when cash is received before or after the service (unearned revenue or prepaid expenses), and missing transaction isn’t a standard entry type.