Service revenue earned on account, Accounting Basics

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Service revenue earned on account

Metro performed courier deliverance services for a customer who agreed to pay USD 900 at a later date. The company approved credit rather than requiring the customer to pay cash immediately. This is called as earning revenue on account. The transaction comprise of exchanging services for the customer's promise to pay later. This transaction is alike to the preceding transaction in that stockholders' equity retained earnings enhance because the company has earned revenues. But the transaction differs for the reason that the company has not received cash. In its place the company has received another asset an account receivable. As noted previously an account receivable is the amount unpaid from a customer for goods or services already provided. The company has a lawful right to collect from the customer in the future. Accounting makes out such claims as assets. The accounting equation counting this USD 900 item is as follows:

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