Question

Neeta Landscaping Company provides lawn care services to a customer and immediately receives $45. Which of the following describes how the company will account for this transaction? Debit Other Operating Expense for $45. Credit Cash for $45. Credit Service Revenue for $45. Retained earnings decreases by $45.

Answer 1

The correct option is Credit Service Revenue for $45

Step-by-step explanation:

The receipt of $45 for the services rendered would be a debit to cash account and a credit to sales service revenue because an increase in cash is naturally a debit entry in cash account while increase in revenue is a credit entry.

Above all,debit of other operating expense is wrong because no cost was incurred instead a revenue was recorded.

Also,crediting cash was also wrong because the $45 was an inflow not an outflow of cash that require a credit entry in cash account.