Billing customers on account increases which two accounts?

• A. Accounts Receivable and Fees Earned
• B. Accounts Receivable and Cash
• C. Accounts Payable and Fees Earned
• D. Cash and Fees Earned

Answer: (A)

Billing a customer on account creates both an asset and revenue: you record a receivable because the customer owes you money (Accounts Receivable) and you recognize the earned revenue from the service (Fees Earned). The receivable increases as it represents future cash collection, while Fees Earned increases owners’ equity through revenue. Cash isn’t affected yet since payment hasn’t been received, and this transaction doesn’t involve Accounts Payable. The typical journal entry is Debit Accounts Receivable and Credit Fees Earned.