Delgado sold services on account to Valley Landscaping for $500. What is the correct entry?

• A. Debit Accounts Receivable; Credit Sales
• B. Debit Sales; Credit Accounts Receivable
• C. Debit Cash; Credit Sales
• D. Debit Valley Landscaping; Credit Accounts Receivable

Answer: (A)

Selling services on account means you’ve earned revenue now but haven’t received cash yet, so you create an asset called accounts receivable. The correct entry records that asset and the earned revenue: debit Accounts Receivable for 500 and credit Sales (or Service Revenue) for 500. This shows the customer owes you money and that you’ve recognized the service revenue.

The other options would either record cash when it hasn’t been received, debit the revenue (which would decrease revenue), or debit the customer’s account instead of the receivable, which isn’t how receivables are tracked.