Accrual adjustments are needed when a company has earned
Blank
______ but cash has not yet been collected.

Question

Accrual adjustments are needed when a company has earned 
Blank
______ but cash has not yet been collected.

BlackTom AI · Accepted Answer

Accrual accounting recognizes revenue when it is earned, not when cash is received, so the blank is Revenue.

1. Relevant knowledge points and concepts
- Accrual basis accounting: transactions are recorded when they occur, reflecting earned revenues and incurred expenses regardless of cash flow.
- Revenue recognition principle: revenue is recognized when goods or services are delivered and the earning process is substantially complete.
- Adjusting entries: accrual adjustments record revenues earned but not yet billed/collected (accrued revenues) or expenses incurred but not yet paid (accrued expenses).

2. Step-by-step reasoning
- A company performs work or delivers goods to a customer but has not yet received payment. Under accrual accounting, the company has an enforceable right to payment because it has earned the revenue.
- To properly match revenues with the period they were earned and to present accurate financial statements, an adjusting entry is required at period end.

3. Typical journal entries (intermediate steps)
- When revenue is earned but cash not yet received: Debit Accounts Receivable (asset) and Credit Revenue (income).
- When cash is later collected: Debit Cash and Credit Accounts Receivable.
- No cash entry until receipt, but revenue is recognized immediately at earning.

4. Why the correct answer is correct
- The question specifies "earned but cash has not yet been collected," which exactly describes revenue earned on account (accrued revenue). Therefore an accrual adjustment is required to record that revenue in the current period.

5. Why the other options are incorrect
- Assets: An asset is what the company owns; the phrase “earned but cash not collected” refers to earning income, not the asset category itself.
- Expenses: Expenses are costs incurred, not amounts earned; the scenario describes earning, not incurring costs.
- Liabilities: Liabilities are obligations owed by the company; earning revenue does not create a liability.

6. Conclusion
The correct answer is Revenue, which matches the provided answer.

Accrual adjustments are needed when a company has earned Blank ______ but cash has not yet been collected.单项选择题

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