Question

When revenues are earned,

Select one:

a. the revenue is recorded by increasing an asset account and increasing a revenue account.

b. the revenue is recorded by decreasing an asset account and increasing a revenue account.

c. the revenue is recorded by increasing an asset account and decreasing a revenue account.

Answer 1

Correct Option is Option a the revenue is recorded by increasing an asset account and increasing a revenue account.

Meaning of Revenues Earned :

Revenues earned means our goods , products, material , or our services deliver to the customer. We issued bill for the same to the customer. Same will be called as revenue earned.

It is not required that payement from the customer received in cash or in bank for revenue recognition as per accrual accouting principle.

As and when goods or services has been deliverd to the customer revenue for the same will be recognised in income statement.

As per accounting principle each and every transactions has dual effect.

When revenue has been  earned in that cases two accounts are get effected. One is customer account and second is revenues account.

Customer account under accouting languiage known as account receivable account. Account receivable is current assets of the busness or company.

Due tot that when revenue has been earned in that case assets of the company or busness will get increased.

Second effect for the same  transaction will be increasing revenue account, because when revenue is recognised it will be addition in revenue.

So. when revenue earned in that case revenue is recorded by increasing an assets account and increasing a revenue account.

Option B Will be incorrct due to reason that assets never get decresing due to revenues recognition .

Option C will be incorrect due to reason that revenue account never get decreased due to earning of revenue .It will always get increased as and when revenue erned.