On Jan. 2, Callie Taylor Performed $800 Worth Of Services For A Client. The Client Paid $100 Immediately, But Promised To Pay The Balance Next Month. The Journal Entry To Record This Transaction In Callie Taylor's Books Would Be:

On Jan. 2, Callie Taylor Performed $800 Worth Of Services For A Client. The Client Paid $100 Immediately, But Promised To Pay The Balance Next Month. The Journal Entry To Record This Transaction In Callie Taylor's Books Would Be: A. debit cash $100, debit receivables $700 and credit sales $800 B. debit cash $800 and credit sales $800 C. debit receivables $800 and credit sales $800 D. debit cash $100, debit receivables $700 and credit sales $100
To solve problem / question, we record the Business Transactions from the points view of business of Callie Taylor, which is a service business providing services to its clients.

When the Callie Taylor performed the services worth $800, then the business earned the revenue whether the cash is received or not according to Accrual Basis of Accounting. Here, the client paid $100 in cash and promised to pay the remaining $700 ($800 - $100) on the next month is a receivables for the Callie Taylor’s business, which is a current asset and shown on balance sheet under assets side.

As the business received partially in cash against the services performed, so we record the following journal entry in the Books of Accounts of Callie Taylor’s business:

(i)

                                        Cash a/c  $100

                                                       Sales a/c $100

                                   (Cash Sales Made On 2nd January)

In the above entry, the cash is debited as it is received by the business of Callie Taylor’s company, so it is increasing and sales is also increasing, as the business is performed the services and earned the revenue, so it is credited.

The remaining amount shows receivables i.e., services are performed but the payment is not received from client, so the following entry is recorded as shown below:

(ii)

                            Accounts Receivable a/c $700

                                                                  Sales a/c $700

                         (Sales Made On Account / Credit On 2nd January)

In the above entry, accounts receivable is debited as it is increasing and sales is also credited as it is increasing.

If we join these (i) and (ii) two entries, we get one combined entry as shown below: 

                        Cash a/c  $100

                       Accounts Receivable a/c  $700

                                                              Sales a/c $800

                      (Sales Made For Cash And On Account On 2nd January)

So, we record either two entries separately i.e., one for cash and other one for credit or one single combined entry, the result will be the same.

So, the correct answer of this multiple choice question is A.

The other options (B,C and D) are wrong choices here.

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