Transaction 5: Earning of Serv
Transaction 5: Earning of Service Revenue onAccount
Smart Touch performs a service for clients who do not payimmediately. The business receives the clients’ promise to pay$3,000 within one month. This promise is an asset, andAccount Receivable, because the agency expects tocollect the cash in the future. In accounting, we say that SmartTouch performed this service on account. It is performingthe service (doing the work), not collecting the cash, thatearns the revenue. As in transaction 4, increasingearnings increases Sheena Bright, Capital. Smart Touch records theearning of $3,000 of revenue on accounts, as follows.
ASSETS LIABILITIES OWNER’S EQUITY
|
Cash |
Accounts Receivable |
Office Supplies |
+ |
Land |
Accounts Payable |
+ |
Sheena Bright, Capital |
Type of Owners’ Equity |
|
|
Bal |
? |
? |
35,500 |
||||||
|
? |
500 |
||||||||
|
3,000 |
= |
3,000 |
|||||||
|
? |
? |
20,000 |
? |
? |
|||||
|
39,000 |
39,000—- |
– |
—-39,000 |
Answer:
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| Earning of Service Revenue onAccount | ||||||||||
| ASSETS | LIABILITIES | OWNER’SEQUITY | ||||||||
| Cash | + | AccountsReceivable | + | OfficeSupplies | + | Land | = | AccountsPayable | + | Sheena Bright,Capital |
| 35,500.00 | + | + | + | = | + | 35,500.00 | ||||
| + | + | 500.00 | + | = | 500.00 | + | ||||
| (20,000.00) | + | + | + | 20,000.00 | = | + | ||||
| + | 3,000.00 | + | + | = | + | 3,000.00 | ||||
| 15,500.00 | + | 3,000.00 | + | 500.00 | + | 20,000.00 | = | 500.00 | + | 38,500.00 |
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