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Financial And Managerial Accounting

15th Edition
WARREN + 1 other
ISBN: 9781337902663

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BuyFindarrow_forward

Financial And Managerial Accounting

15th Edition
WARREN + 1 other
ISBN: 9781337902663
Textbook Problem

Adjusting entry for accrued fees

At the end of the current year, $59,500 of fees have been earned but have not been billed to clients.

  1. A. Journalize the adjusting entry to record the accrued fees.
  2. B. If the cash basis rather than the accrual basis had been used, would an adjusting entry have been necessary? Explain.

A.

To determine

Record the adjusting entry for the accrued fees.

Explanation

Record the adjusting entry for the accrued fees.

DateAccount Titles and ExplanationDebit ($)Credit ($)
December 31Account Receivable 59,500
        Service revenue 59,500
(To record the fees earned but not yet received)

Table (1)

Following is the impact of the adjusting entry in the accounting equation.

{Asset+$59,500}=Liabilities+{Stockholders'equity+$59,500}

Accrued Revenue

Accrued revenue refers to the revenue those are earned but not yet received in a particular accounting period

B.

To determine

Explain the necessity of the adjusting entry, if cash basis accounting is followed instead of accrual basis accounting.

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