Which of the following best describes the adjusting entry to record an accrued revenue at the end of an accounting period?

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

Answer: (C)

Verified step by step guidance

1. Understand the concept of accrued revenue: Accrued revenue refers to income that has been earned but not yet received in cash or recorded in the accounts by the end of the accounting period.
2. Identify the accounts involved: When recording accrued revenue, the two accounts affected are 'Accounts Receivable' (an asset account) and 'Revenue' (a revenue account).
3. Determine the nature of the adjustment: Since the revenue has been earned but not yet received, we need to increase (debit) 'Accounts Receivable' to reflect the amount owed to the company and increase (credit) 'Revenue' to recognize the income earned.
4. Write the journal entry: The adjusting entry to record accrued revenue is: Debit 'Accounts Receivable' and Credit 'Revenue'. This ensures that the revenue is recognized in the correct accounting period, adhering to the accrual basis of accounting.
5. Review the incorrect options: The other options provided (e.g., Debit Revenue; Credit Accounts Receivable) do not align with the correct treatment of accrued revenue. For example, debiting 'Revenue' would decrease it, which is incorrect in this context.