Which of the following is an example of an adjusting entry for accrued revenues?

• A. Debiting Salaries Expense and crediting Salaries Payable for salaries owed but not yet paid
• B. Debiting Accounts Receivable and crediting Service Revenue for services performed but not yet billed
• C. Debiting Prepaid Insurance and crediting Insurance Expense for expired insurance
• D. Debiting Unearned Revenue and crediting Service Revenue for cash received in advance

Answer: (B)

Verified step by step guidance

1. Understand the concept of accrued revenues: Accrued revenues are revenues earned but not yet received in cash or recorded. Adjusting entries for accrued revenues ensure that revenue is recognized in the period it is earned, even if payment has not been received.
2. Review the options provided: Each option represents a different type of adjusting entry. You need to identify the one that matches the definition of accrued revenues.
3. Analyze the correct answer: Debiting Accounts Receivable and crediting Service Revenue reflects an adjusting entry for accrued revenues. This entry records revenue earned but not yet billed to the customer, aligning with the accrual basis of accounting.
4. Compare the other options: The other options represent different types of adjusting entries, such as accrued expenses (e.g., salaries owed but not paid), prepaid expenses (e.g., expired insurance), and unearned revenue (e.g., cash received in advance). These do not pertain to accrued revenues.
5. Conclude the reasoning: The correct adjusting entry for accrued revenues involves recognizing revenue earned but not yet billed, which is achieved by debiting Accounts Receivable and crediting Service Revenue.