At the end of the current year, $8,450 of fees have been earned but have not been billed to clients.

At the end of the current year, $8,450 of fees have been earned but have not been billed to clients.

a. Journalize the adjusting entry to record the accrued fees.

b. If the cash basis rather than the accrual basis had been used, would an adjusting entry have been necessary? Explain.

Answer:


a. Accounts Receivable 8,450  Fees Earned  8,450 Accrued fees

b.  No. If the cash basis of accounting is used, revenues are recognized only when the cash is received. Therefore, earned but unbilled revenues would not be recognized in the accounts, and no adjusting entry would be necessary.