If sales revenue is credited in a journal entry, which of the following is most likely to be debited?

• A. Accounts Receivable
• B. Unearned Revenue
• C. Sales Returns and Allowances
• D. Retained Earnings

Answer: (A)

Verified step by step guidance

1. Understand the nature of the transaction: When sales revenue is credited, it indicates that the company has earned revenue from selling goods or services. The corresponding debit entry will depend on the type of transaction and how the revenue was earned.
2. Consider the most common scenario: If the sale was made on credit (i.e., the customer has not yet paid), the debit entry would typically be to 'Accounts Receivable,' which represents the amount owed by the customer.
3. Evaluate other options: 'Unearned Revenue' is debited when revenue is recognized from a liability that was previously recorded, but this does not apply here since the revenue is already earned. 'Sales Returns and Allowances' is debited when goods are returned or allowances are given, which is not relevant to the initial recording of sales revenue. 'Retained Earnings' is not debited in this context, as it is part of equity and not directly involved in revenue recognition.
4. Apply the accounting equation: The journal entry for sales revenue on credit would typically be: Debit 'Accounts Receivable' (an asset account) and Credit 'Sales Revenue' (a revenue account). This aligns with the accrual basis of accounting, where revenue is recognized when earned, not necessarily when cash is received.
5. Confirm the correct answer: Based on the analysis, the most likely account to be debited when sales revenue is credited is 'Accounts Receivable,' as it reflects the amount owed by the customer for the sale made on credit.