Question 6 of 7beginner🔧 ApplyMCQ1 mark

The journal entry to record the sale of services on credit should include:

Exercise: Test Your Understanding - III | Q: 2
For More Understanding

Explanation

Option (d) is correct. When services are sold on credit, the business receives a right to receive payment (debtor) which is an asset and must be debited. Simultaneously, fees income is earned which is a revenue and must be credited. This follows the fundamental rule: debit the receiver (asset increase), credit the income (revenue increase). Options (a), (b), and (c) are incorrect as they either misclassify accounts or reverse the debit-credit relationship.

Solution Steps

  1. Step 1: Identify accounts involved - Debtors (asset) and Fees Income (revenue)

  2. Step 2: Apply accounting rules - Asset increase = Debit; Revenue increase = Credit

  3. Step 3: Record entry - Debit Debtors, Credit Fees Income

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