Neeta Landscaping Company provides lawn care services to a customer and immediately receives $45. Which of the following describes how the company will account for this transaction? Debit Other Operating Expense for $45. Credit Cash for $45. Credit Service Revenue for $45. Retained earnings decreases by $45.

Question

Business

Luke Lamb

31 December, 10:22

Neeta Landscaping Company provides lawn care services to a customer and immediately receives $45. Which of the following describes how the company will account for this transaction? Debit Other Operating Expense for $45. Credit Cash for $45. Credit Service Revenue for $45. Retained earnings decreases by $45.

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Answers (1)

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Alison Callahan · Answer 1

The correct option is Credit Service Revenue for $45

Explanation:

The receipt of $45 for the services rendered would be a debit to cash account and a credit to sales service revenue because an increase in cash is naturally a debit entry in cash account while increase in revenue is a credit entry.

Above all, debit of other operating expense is wrong because no cost was incurred instead a revenue was recorded.

Also, crediting cash was also wrong because the $45 was an inflow not an outflow of cash that require a credit entry in cash account.