What is the entry to record service revenue of $5,300?

• A. Debit Cash $5,300, Credit Service Revenue $5,300.
• B. Debit Service Revenue $5,300, Credit Cash $5,300.
• C. Debit Accounts Receivable $5,300, Credit Service Revenue $5,300.
• D. Debit Cash $5,300, Credit Accounts Receivable $5,300.

Answer: (C)

When revenue is earned on account, you must recognize both the revenue and the amount the customer owes. Revenue increases owners’ equity, and it is recorded as a credit. Accounts receivable is an asset that represents amounts owed by customers, and assets are increased with a debit. So the correct entry is to debit Accounts Receivable for 5,300 and credit Service Revenue for 5,300. This shows you earned 5,300 in service revenue and expect to collect that amount from customers later.

Why the other options don’t fit: debiting cash would imply cash was received at the time of the service, which isn’t stated; debiting service revenue would decrease revenue, which is incorrect; debiting accounts receivable and crediting service revenue would reduce both the asset and revenue, which is the opposite of what happens when revenue is earned on account; and debiting cash to credit accounts receivable would simply indicate the collection of a receivable, not the recognition of the revenue itself.