Question

For the current year, a business has earned (but not recorded or received) $200 of interest from investments. Demonstrate the required adjusting entry by completing the following sentence. The required adjusting entry would be to debit the

Answer 1

The required adjusting entry would be to debit the accounts receivable by $200.

Explanation:

The question says that the business has earned $200 but have not received it yet.

The business has to 'receive' the payment in the future.

The party who needs to send this payment is liable to pay them $200 in the future.

Businesses record this as 'accounts receivable' to keep a record of who owes them money and 'account payable' is recorded when the business owes someone money.

Therefore, the required adjusting entry would be to debit the accounts receivable by $200.