A revenue journal entry, also known as a sales journal entry, is a record of the revenue generated by the sale of goods or services.
It is used to reflect the financial impact of a sale on the company’s accounts.
The entry typically includes debiting the cash or accounts receivable account and crediting the revenue account.
For example, if a customer pays with cash, the entry would involve debiting the cash account and crediting the revenue account.
If the customer pays on credit, the entry would instead debit the accounts receivable account and credit the revenue account.
The specific accounts involved in the entry may vary based on the nature of the sale and the company’s accounting practices.
Journal Entry In Depth
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Service Revenue Journal Entry
A service revenue journal entry records the income a company earns from providing services.
When services are rendered for cash, the journal entry includes a debit to Cash and a credit to Service Revenue.
Debit: Cash $5,000
Credit: Service Income $5,000
If the services are rendered on account, the entry includes a debit to the asset Accounts Receivable and a credit to Service Revenue.
Debit: Accounts Receivable $5,000
Credit: Service Income $5,000
A sales revenue journal entry is a bookkeeping record of a sale made to a customer.
It records the revenue generated by the sale of goods.
The content of the entry differs depending on whether the customer paid with cash or was extended credit.
In the case of a cash sale, the entry includes a debit to Cash, and a credit to Revenue.
Debit: Cash $100,000
Credit: Sales $100,000
If the customer was instead extended credit, the entry includes a debit to Accounts Receivable, and a credit to Revenue.
Debit: Accounts Receivable $100,000
Credit: Sales/Service Income $100,000
To create a sales journal entry, you must debit and credit the appropriate accounts, and your end debit balance should equal your end credit balance.
Deferred Revenue Journal Entry
A deferred revenue journal entry is a recording of revenue not yet earned.
It occurs when a company receives payment for products or services in advance of delivering them.
This is recorded as a liability on the balance sheet because the company owes the customer the product or service.
The journal entry typically involves debiting the cash account and crediting the deferred revenue account, which increases the liability.
When the revenue is eventually earned, it is proportionally recorded as revenue on the income statement, adhering to the matching principle in accounting.
Let’s say a company receives $12,000 in advance from a customer for an annual service contract.
The journal entry to record this transaction would be:
Debit: Cash $12,000
Credit: Deferred Revenue $12,000
This entry recognizes the cash received and records the corresponding liability for the unearned revenue.
When the service is provided over time, the deferred revenue is gradually recognized as revenue on the income statement, following the matching principle in accounting.
Debit: Deferred Revenue $1,000
Credit: Service Income $1,000
Deferred Rent Revenue
A deferred rent revenue journal entry is a recording of revenue that has not yet been earned.
This typically occurs when a company receives payment for rent in advance of the related time period.
The journal entry for deferred rent involves debiting the cash account and crediting the deferred rent account when the rent is received.
This ensures that the company reflects the liability in the Balance Sheet in accordance with the matching principle in accounting.
Accrued Service Revenue
Accrued service revenue is recorded through an adjusting journal entry to recognize revenue that has been earned but not yet billed or received in cash.
This entry is made to reflect the revenue as an asset on the balance sheet and as earned revenue on the income statement.
The journal entry typically involves debiting an accrued revenue account and crediting a revenue account.
For example, if a service has been provided but not yet billed, the entry would be to debit accrued service revenue and credit service revenue.
When the customer is billed, the entry is reversed.
Accrued revenue is an important concept in accrual accounting, as it ensures that revenue is recognized in the period in which it is earned, regardless of when cash is received.
It is particularly common in industries where services are provided over extended periods.
Debit: Accrued Revenue (Receivable) $100
Credit: Sales $100
Unearned Service Revenue
Unearned service revenue is the money received in advance for services that are yet to be provided.
It is considered a liability on the balance sheet until the revenue is earned.
The journal entry for unearned service revenue involves a debit to the cash account and a credit to the unearned service revenue account.
When the revenue is earned, the unearned service revenue account is debited, and the revenue account is credited to recognize the earnings.
Let say a company receives $10,000 in advance for a service, the initial journal entry would be to debit the cash account for $10,000 and credit the unearned service revenue account for $10,000.
When the service is provided, the company would debit the unearned service revenue account for the portion of the revenue that has been earned and credit the revenue account for the same amount.
Interest Revenue Journal Entry
Interest revenue is the earnings that an entity receives from any investments it makes or on debt it owns.
Under the accrual basis of accounting, interest revenue should be recorded even if it has not yet been paid in cash, as long as it has been earned.
This is done with an accrual journal entry.
For example, if a company using the accrual basis of accounting purchases a certificate of deposit and earns interest on it, the journal entry to record this interest revenue would be:
Debit: Interest receivable $1,000
Credit: Interest revenue $1,000