Question

Transaction 5: Earning of Service Revenue on Account

Smart Touch performs a service for clients who do not pay immediately. The business receives the clients’ promise to pay $3,000 within one month. This promise is an asset, and Account Receivable, because the agency expects to collect the cash in the future. In accounting, we say that Smart Touch performed this service on account. It is performing the service (doing the work), not collecting the cash, that earns the revenue. As in transaction 4, increasing earnings increases Sheena Bright, Capital. Smart Touch records the earning 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 1

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Earning of Service Revenue on Account
ASSETS		LIABILITIES		OWNER’S EQUITY
Cash	+	Accounts Receivable	+	Office Supplies	+	Land	=	Accounts Payable	+	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