Services rendered and billed to customers for future payment create transactions that are posted to which accounts?

• A. Accounts payable and revenue
• B. Accounts receivable and cash
• C. Accounts payable and accounts receivable
• D. Accounts receivable and revenue

Answer: (D)

When services are performed and billed to customers for future payment, you have earned revenue but haven’t received cash yet. In double-entry bookkeeping this is recorded by increasing accounts receivable (an asset) to reflect the amount customers owe, and increasing revenue to recognize the income. The typical entry is a debit to accounts receivable and a credit to revenue. Cash is not affected until the customer actually pays. So the correct pair of accounts is accounts receivable and revenue. The other options mix up items you owe to others or involve cash prematurely, which doesn’t fit this situation.