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A customer who was previously invoiced $200 on account now pays in full. What journal entry records the receipt?
ADebit Accounts Receivable $200; credit Cash $200
BDebit Cash $200; credit Accounts Receivable $200
CDebit Cash $200; credit Fees Earned $200
DDebit Fees Earned $200; credit Cash $200
Answer & Solution
Correct answer: B. Debit Cash $200; credit Accounts Receivable $200
1. Receiving cash increases the Cash asset, so Cash is debited.
2. The receivable is settled and decreases, so Accounts Receivable is credited.
3. Revenue was already recorded when the service was provided, so Fees Earned is not credited again, ruling out C.
4. Option A reverses the entry; option D wrongly debits revenue.
5. Therefore debit Cash $200 and credit Accounts Receivable $200.
_Source: Jonick, Principles of Financial Accounting (CC BY-SA 4.0), §1.4.5 "Revenue Transactions on Account", p.30_
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