Question

The adjusting entry to record an accrued revenue is:

	A.	Increase an expense; increase a liability.
	B.	Increase an asset; increase revenue.
	C.	Decrease a liability; increase revenue.
	D.	Increase an expense; decrease an asset.
	E.	Increase an expense; decrease a liability.

Answer 1

The adjusting entry to record an accrued revenue is to increase an asset and increase revenue. Hence the correct answer is option B i.e. increase an asset;increase revenue.

This can be illustrated with the help of following example:

If an entity has provided the service for $500 on 31st December 2019, however the amount has not been collected yet, the customer has promised to pay the same on 20th of January 2020. So the entry as on 31st December 2019 would be as follows:

Receivables A/c------------------ Dr. 500

To, Service Revenue 500

In the above example it can be seen that the receivables i.e. assets is increasing and Service revenue is also increasing.

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