P3-3 U.S. Political Consultants has been in existence for manyyears. During the
ID: 2458235 • Letter: P
Question
P3-3
U.S. Political Consultants has been in existence for manyyears. During the month of November, the following eventsoccurred:
1. The owner’s contributed an additional 6,500 to thebusiness to finance an expansion of operations.
2. Consulting services totaling 11,000 were performed oncredit during November and billed to customers.
3. A loan in the amount of 25,000 was obtained from awealthy campaign contributor.
4. Expenses in the amount of 6,000 were incurred during themonth. One-third had been paid for by month end.
5. Cash of 18,500 was collected from customers for whomservices had been performed during September and October.
6. Services totaling 4,500 were performed for customers whohad paid in the previous month for the services.
U.S. uses accrual basis accounting. For which of the eventsabove should revenue be recorded in November? In each case,how much revenue should be recorded? If an event does notinvolve revenue, specify why not?
Explanation / Answer
Hey Lucky Star , These Journal Entries will make it simpler for you tounderstand whether revenue should be recorded inNovember. The rule is " If the journal entry involves revenue Account Record ,Otherwise Don't "1 No Cash 6,500.00 Owners' Capital 6,500.00 2 Yes Accrued Revenue 11,000.00 Revenue 11,000.00 3 No Cash 25,000.00 Loan 25,000.00 4 No Expenses 6,000.00 Cash 2,000.00 Expenses Payable 4,000.00 5 No Cash 18,500.00 Accrued Revenue 18,500.00 6 Yes Unearned Revenue 4,500.00 Revenue 4,500.00 Note For 4 , there is no question of revenue at all . However , an expenditure of 6000 should be recorded in November . 1 Hope this helps !! 1 No Cash 6,500.00 Owners' Capital 6,500.00 2 Yes Accrued Revenue 11,000.00 Revenue 11,000.00 3 No Cash 25,000.00 Loan 25,000.00 4 No Expenses 6,000.00 Cash 2,000.00 Expenses Payable 4,000.00 5 No Cash 18,500.00 Accrued Revenue 18,500.00 6 Yes Unearned Revenue 4,500.00 Revenue 4,500.00 Note For 4 , there is no question of revenue at all . However , an expenditure of 6000 should be recorded in November .
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