Company A provided $300 service to a customer today. The customer paid $100 cash today and will pay $200 in 10 days. Which entry is correct for the company A?

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BlackTom AI · Accepted Answer

First, let's restate the scenario to ensure understanding: Company A performed services worth 300 dollars today, received 100 dollars in cash today, and expects 200 dollars to be paid in 10 days, creating an accounts receivable for the remaining amount.
Option 1: 'credit revenue by 100' — This would reduce revenue by 100, which is incorrect because revenue is earned when the service is provided and should be recognized for the full 300, not reduced by received cash. A credit to revenue is not appropriate for the cash receipt scenario.
Option 2: 'credit cash by 100' — Crediting cash would decrease cash, which contradicts the actual event of receiving cash. Cash should increase when payment is received, so this option misstates the normal cash flow direction.
Option 3: 'debit cash by 100' — Debiting cash correctly reflects the increase in cash due to the cash receipt of 100. This is part of the journal entry for the transaction: Cash increases (debit) by 100, and the remaining 200 should be recorded as receivable (debit accounts receivable) since it is not yet collected.
Option 4: 'credit account payable by $200' — Crediting accounts payable would imply a liability decrease or related obligation adjustment, which does not align with the described event. There is no payable arising here; the customer owes Company A money, not the other way around.
In summary, among the choices, option 3 aligns with the correct treatment of the cash receipt. The full appropriate journal entry would include debiting Cash 100 and debiting Accounts Receivable 200, and credit Revenue 300, reflecting both the cash collection and the receivable for the remaining amount earned today.

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Company A provided $300 service to a customer today. The customer paid $100 cash today and will pay $200 in 10 days. Which entry is correct for the company A?

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