Which of the following journal entries records the adjustment for revenue earned but not yet received or recorded at the end of the accounting period?

• A. Debit Unearned Revenue; Credit Cash
• B. Debit Accounts Receivable; Credit Service Revenue
• C. Debit Service Revenue; Credit Accounts Receivable
• D. Debit Cash; Credit Unearned Revenue

Answer: (B)

Verified step by step guidance

1. Understand the concept of accrued revenue: Accrued revenue refers to revenue that has been earned but not yet received or recorded by the end of the accounting period. This adjustment ensures that the revenue is recognized in the correct period according to the accrual basis of accounting.
2. Identify the correct accounts involved: Since the revenue has been earned but not yet received, the accounts involved are 'Accounts Receivable' (to record the amount owed by customers) and 'Service Revenue' (to recognize the revenue earned).
3. Determine the correct journal entry: To record the adjustment, you need to debit 'Accounts Receivable' to increase the asset account (representing the amount owed by customers) and credit 'Service Revenue' to increase the revenue account (representing the revenue earned).
4. Eliminate incorrect options: Review the provided options and eliminate entries that do not align with the concept of accrued revenue. For example, 'Debit Unearned Revenue; Credit Cash' is incorrect because it pertains to deferred revenue, not accrued revenue. Similarly, 'Debit Service Revenue; Credit Accounts Receivable' reverses the correct entry, and 'Debit Cash; Credit Unearned Revenue' pertains to cash transactions, not accrued revenue.
5. Confirm the correct answer: The correct journal entry to record revenue earned but not yet received or recorded is 'Debit Accounts Receivable; Credit Service Revenue'. This adjustment ensures compliance with the accrual basis of accounting.