What is the effect of recognizing an accrued revenue on the balance sheet at period end?

• A. Decreases Accounts Receivable and Revenue.
• B. Increases Accounts Receivable and Revenue; increases net income.
• C. Increases cash and revenue.
• D. Decreases net income.

Answer: (B)

Recognizing accrued revenue means you’ve earned revenue by period end but haven’t yet billed the customer or received cash. The adjusting entry increases an asset (Accounts Receivable) and increases revenue. That boosts net income for the period, which in turn raises retained earnings in equity. Cash isn’t affected until payment is actually received.

So the effect is an increase in Accounts Receivable and Revenue, and an increase in net income (and thus equity). The other options fail because cash isn’t increased yet, and net income isn’t reduced or the asset decreased.