What does recording accrued interest revenue imply?

What does recording accrued interest revenue imply?

• A. Cash has been received
• B. Revenue has not yet been earned
• C. Revenue has been earned and cash received
• D. Revenue has been earned but cash not yet received

Answer: (D)

In accrual accounting, revenue is recorded when it’s earned, regardless of when cash is received. Recording accrued interest revenue means the interest has been earned during the period, but the cash hasn’t come in yet. This entry recognizes the revenue now and creates an asset to reflect the amount owed: Debit Interest Receivable and Credit Interest Revenue. When the cash is eventually received, you would Debit Cash and Credit Interest Receivable. The other options don’t fit because cash hasn’t been received yet, so cash isn’t affected; the revenue has been earned, not just recorded as unearned; and it isn’t both earned and cash received.

In accrual accounting, revenue is recorded when it’s earned, regardless of when cash is received. Recording accrued interest revenue means the interest has been earned during the period, but the cash hasn’t come in yet. This entry recognizes the revenue now and creates an asset to reflect the amount owed: Debit Interest Receivable and Credit Interest Revenue. When the cash is eventually received, you would Debit Cash and Credit Interest Receivable. The other options don’t fit because cash hasn’t been received yet, so cash isn’t affected; the revenue has been earned, not just recorded as unearned; and it isn’t both earned and cash received.