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A two-month job begins on 1 June for a total price of $4,000, billed only on completion. By 30 June, $2,500 of work has been done. What month-end adjusting entry records the accrued revenue?
ADebit Accounts Receivable $4,000; credit Fees Earned $4,000
BDebit Fees Earned $2,500; credit Accounts Receivable $2,500
CDebit Cash $2,500; credit Fees Earned $2,500
DDebit Accounts Receivable $2,500; credit Fees Earned $2,500
Answer & Solution
Correct answer: D. Debit Accounts Receivable $2,500; credit Fees Earned $2,500
1. Revenue earned in June is the work done: $\$2{,}500$.
2. The customer owes for completed work, so Accounts Receivable is debited $\$2{,}500$.
3. Revenue is recognised by crediting Fees Earned $\$2{,}500$, so D is correct.
4. B reverses the entry; C uses cash though none was received; A records the full unfinished contract.
_Source: Jonick, Principles of Financial Accounting (CC BY-SA 4.0), §2.5.2 "Fees Earned—Accrued Revenue", p.86_