Which entry records service revenue of $16,000?

• A. Debit Cash $16,000, Credit Service Revenue $16,000.
• B. Debit Accounts Receivable $16,000, Credit Service Revenue $16,000.
• C. Debit Service Revenue $16,000, Credit Cash $16,000.
• D. Debit Cash $16,000, Credit Accounts Receivable $16,000.

Answer: (A)

When service revenue is earned and cash is received, the accounting entry increases the asset (cash) with a debit and increases revenue with a credit. So the correct entry is to debit Cash for 16,000 and credit Service Revenue for 16,000. This follows the rule that asset increases are debited and revenue increases are credited.

If the service had been performed on account, you’d debit Accounts Receivable and credit Service Revenue instead. Debiting Service Revenue or crediting Cash would not correctly reflect earning revenue and receiving cash. Debiting Cash while crediting Accounts Receivable would be used to settle a receivable, not to record the revenue.