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:

Ownership Interest

A legal right or stake in property, indicating the owner's claim to control and benefit from it.

Articles of Incorporation

Legal documents filed with a governmental body to legally document the creation of a corporation.

Capital Surplus

Excess amount received by a company over the par value of its stock, representing additional paid-in capital.

Earned Surplus

The portion of a company's net income that is retained for reinvestment, rather than being distributed as dividends to shareholders.