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Accrued revenue requires an adjusting entry in which situation?
AA service is performed and cash is collected on the same day
BA customer pays in full before any of the work has been started
CWork is performed across periods and billed only when the job is finished
DSupplies bought in bulk are gradually used up over several months
Answer & Solution
Correct answer: C. Work is performed across periods and billed only when the job is finished
1. Accrued revenue arises when a job spans more than one period and the customer is billed only on completion.
2. The portion earned each period must still be recognised, requiring an adjusting entry, so C is correct.
3. B describes deferred revenue (cash in advance).
4. A is a same-day cash sale needing no adjustment; D is a deferred expense.
_Source: Jonick, Principles of Financial Accounting (CC BY-SA 4.0), §2.5.2 "Accrued Revenue", p.86_