A company performs $10,000 of services and issues an invoice to the customer using the accrual method what’s the correct entry to record the transaction

Question:- A company performs $10,000 of services and issues an invoice to the customer using the accrual method what’s the correct entry to record the transaction?

Answer

As per the accrual accounting method, revenue is gained when it becomes outstanding and not at what time cash is encompassed. In this case, the company also provided services worth $10,000 to a customer and issued an invoice thus earning that revenue.

Debit Accounts Receivable $10,000

Credit Service Revenue $10,000

This reflects the $10,000 that will be collected from patrons for services offered and the contingent earning of $10,000 made conducting these functions. Debiting Accounts Receivable reflects that $10,000 is due to the company and they will receive it in future once an invoice was paid by a customer. An adjustment is made to increase the revenue account but it also shows that $10,000 of revenue has been earned.

In other words, this posting of an accrual-basis accounting marks the point at which revenue is recognized as well as a corresponding receivable before any cash can be coming in for having provided services . This complies with the matching concept where revenue is matched with expenses in an appropriate accounting period.