indeed assessments Time Remaining: 01:54 Question 8/12 Which is NOT an expense account? Repairs expense Rent expense Accrued expenses Advertising expense Interest expense Continue deed assessments n Time Remaining: 01:51 Question 9/12 A company performs $10,000 of services and ssues an invoice to the customer. Using the accrual method, what’s the correct entry to record the transaction? Debit unearned revenue $10,000, credit sales revenue $10,000 Debit services expense $10,000, credit sales revenue $10,000 Debit accounts payable $10,000, credit sales revenue $10,000 Debit accounts receivable $10,000, credit sales revenue $10,000 Continue
The Correct Answer and Explanation is :
Question 8/12: Which is NOT an expense account?
Answer: Accrued expenses
Explanation:
In accounting, expenses represent the costs incurred by a business in its operations. These costs are typically categorized into expense accounts, such as:
- Repairs Expense: Represents the costs associated with maintaining and repairing assets or equipment.
- Rent Expense: Represents the cost of renting space for business operations.
- Advertising Expense: Represents the costs of marketing and promoting the business.
- Interest Expense: Represents the cost of borrowing funds and paying interest on loans.
However, Accrued Expenses is not an expense account itself but rather a liability account. Accrued expenses represent costs that have been incurred but not yet paid or recorded in a specific period. For example, if a company owes wages to employees but has not yet paid them, it will record these accrued expenses as a liability under “Accrued Liabilities” or “Accrued Expenses” until they are settled. Thus, Accrued Expenses are more of a short-term liability rather than an expense.
Question 9/12: A company performs $10,000 of services and issues an invoice to the customer. Using the accrual method, what’s the correct entry to record the transaction?
Answer: Debit accounts receivable $10,000, credit sales revenue $10,000
Explanation:
Under the accrual basis of accounting, revenues are recognized when earned, not when cash is received. In this case, the company has performed $10,000 worth of services and issued an invoice to the customer, meaning it has earned the revenue, even if the customer has not yet paid.
The correct accounting entry to record this transaction under the accrual method is:
- Debit Accounts Receivable: This increases the asset account because the company has a right to receive the payment from the customer in the future.
- Credit Sales Revenue: This increases the revenue account, as the company has earned the revenue by providing the services.
This reflects the fact that under accrual accounting, revenue is recognized when earned, and expenses are recorded when incurred, regardless of when the actual cash flows occur. Therefore, the correct answer is “Debit accounts receivable $10,000, credit sales revenue $10,000.”
The other options are incorrect because:
- Unearned revenue is used when the company receives payment before providing the services, which is not the case here.
- Services expense is not applicable because the company is not incurring an expense for the services performed; instead, it is earning revenue.
- Accounts payable is a liability account and would only be used if the company owed money to another party, which is not the situation here.