When a Company Performs a Service but Has Not Yet

question 195

Multiple Choice

When a company performs a service but has not yet received payment, it

• A)debits Service Revenue and credits Accounts Receivable.
• B)debits Accounts Receivable and credits Service Revenue.
• C)debits Service Revenue and credits Accounts Payable.
• D)makes no entry until cash is received.

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Definitions:

Fabrication Department

A division within a manufacturing facility where raw materials are assembled or processed into finished goods.

Activity-Based Cost

A costing method that assigns costs to products based on the activities they require, providing more accurate product costing.

Indirect Labor

Indirect labor refers to the wages paid to employees who are not directly involved in producing goods but support the production process.

Activity Pools

Groups of related activities in activity-based costing that accumulate costs to be allocated to cost objects.