At the end of a fiscal period, any revenue that has been earned but not received should be credited to an appropriate:
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A. B. C. D.B
Revenue should be recognized in the period in which it is earned and is credited to the appropriate revenue account.
The correct answer is C. liability account.
When revenue is earned but not yet received at the end of a fiscal period, it represents an amount that the company is entitled to receive from its customers or clients. However, since the payment has not been received, it cannot be recognized as revenue in the income statement. Instead, it is recorded as a liability in the balance sheet to reflect the company's obligation to receive payment in the future.
Liability accounts represent the company's debts or obligations. In this case, the liability account used to record revenue earned but not yet received is typically called "Accrued Revenue" or "Accounts Receivable." This account serves as a temporary placeholder until the payment is received, at which point it will be recognized as revenue in the income statement.
Here's a breakdown of the other answer choices and why they are not correct:
A. Expense account: Expenses are costs incurred by a company in its operations. Revenue and expenses are separate categories in the accounting records. Revenue represents inflows of assets or settlements of liabilities, while expenses represent outflows of assets or incurrences of liabilities. Therefore, crediting an expense account would be incorrect in this case.
B. Revenue account: Although revenue is indeed earned but not received yet, it is not appropriate to credit a revenue account in this situation. Revenue accounts are used to record the inflow of assets resulting from the company's primary operations. Since the payment has not been received, it does not meet the criteria for recognition as revenue.
D. Asset account: Assets are economic resources owned or controlled by a company. While the company is entitled to receive the payment, it has not yet been received, so it cannot be recognized as an asset. Therefore, crediting an asset account would not be appropriate.
In summary, when revenue has been earned but not yet received, it should be credited to a liability account to reflect the company's obligation to receive payment in the future. This treatment aligns with the accrual accounting principle, which recognizes revenues when they are earned, regardless of when the cash is received.