Question

The adjusting entry to record an accrued revenue is:

a. Increase an expense; increase a liability.
b. Increase an asset; increase revenue.
c. Decrease a liability; increase revenue.
d. Increase an expense; decrease an asset.
e. Increase an expense; decrease a liability.

Answer 1

Answer:

The correct answer is c. Decrease a liability; increase revenue.

Explanation:

For example a company receives advance of $ 500 against good to be deliver after one week. On receiving cash company will record following entry.

Debit Cash                      $ 500

Credit Revenue liability  $ 500

On date of sale or delivery following data will be recorded.

Debit Revenue liability    $ 500

Credit Revenue income  $ 500