If services have been rendered to customers during the current accounting period but no revenue has been recorded and no bill has been sent to the customers, why is an adjusting entry needed? What types of accounts should be debited and credited by this entry?

Accounting Sep 28, 2020

Expert Solution

You have just explained accrual accounting in the essence. The reason an entry is required is because that revenue really has been earned, whether billed or not.

The matching concept in accounting says that revenues are matched to expenses in the same accounting period, but since this revenue has not been billed, there is no account receivable. We can still record it to a current asset account called Unbilled Revenue.

The accrual entry for the transaction above would be
Debit Unbilled Revenue
Credit Revenue Earned

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