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22 June, 19:29

Journalizing reversing entries

Ocean Breeze Associates accrued $8,500 of Service Revenue on December 31. Ocean Breeze Associates received $14,500 on January 15, including the accrued revenue recorded on December 31.

Requirements

Record the adjusting entry to accrue Service Revenue.

Record the reversing entry.

Journalize the cash receipt.

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Answers (1)
  1. 22 June, 19:48
    0
    Dr. Cr.

    Adjusting Entry

    December 31

    Account Receivable $8,500

    Revenue $8,500

    Reversing Entry

    January 1

    Revenue $8,500

    Account Receivable $8,500

    Cash Receipt

    January 15

    Cash $14,500

    Revenue $14,500

    Explanation:

    On December 31 the accrued revenue is recording to comply with the accrual principle by debiting account receivable and crediting revenue account.

    A reverse entry of accrued revenue was made on January 1 to eliminate its effect. it does not mean that company has negative revenue it is made to adjust the the cash receipt event of the transaction when its effect will be nil by a credit entry with.

    Cash received on January 15 is recorded against the revenue.
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