Question

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on july 7, 2027, waterway realty co. performed cash services of $1720. the entry to record this transaction would include
a debit to service revenue of $1720.
a debit to cash of $1720.
a credit to accounts receivable of $1720.
a credit to accounts payable of $1720.

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Explanation:

When a company performs cash services, it receives cash (an asset increase, so debit Cash) and recognizes revenue (credit Service Revenue). Let's analyze each option:

• Option 1: Service Revenue is a revenue account, and revenues are credited when earned, so a debit to it is incorrect.
• Option 2: Since cash is received, Cash (an asset) increases, so we debit Cash for $1720. This is correct.
• Option 3: Accounts Receivable is for credit sales, but this is a cash transaction, so no involvement with Accounts Receivable.
• Option 4: Accounts Payable is for amounts owed, and this transaction doesn't relate to payables.

Answer:

B. a debit to Cash of $1720.