EX 3-3 Adjusting entry for accrued fees

At the end of the current year, $59,500 of fees have been earned but have not been billed to clients.

a. Journalize the adjusting entry to record the accrued fees.

b.  If the cash basis rather than the accrual basis had been used, would an adjusting entry have been necessary? Explain.


Answers:

a. Accounts Receivable59,500
Fees Earned59,500
Accrued fees.
b. No. If the cash basis of accounting is used, revenues are recognized only 
when the cash is received. Therefore, earned but unbilled revenues would not 
be recognized in the accounts, and no adjusting entry would be necessary.