A business can provide services in return for cash. The service is provided to the customer and payment from the customer is immediate using cash. There is no credit given to the customer for the provision of the service.
Suppose for example, the business provides services to a customer and receives immediate payment for cash for the amount of 500, then the journal entries will be as follows.
Journal Entry for Cash Received for Services Provided
The accounting records will show the following bookkeeping entries for the cash received for services provided:
Cash Received for Services Provided Bookkeeping Explained
Cash is received from the customer for the provision of the services.
The credit entry to the service revenue account records the revenue earned as a result of providing the service.
The Accounting Equation
The Accounting Equation, Assets = Liabilities + Owners Equity means that the total assets of the business are always equal to the total liabilities of the business This is true at any time and applies to each transaction. For this transaction the Accounting equation is shown in the following table.
In this case one asset (cash) increases representing money received from the customer, this increase is balanced by the increase in owners equity. The credit to the income statement for the service revenue increases the net income which increases the retained earnings and therefore the owners equity in the business.
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About the Author
Chartered accountant Michael Brown is the founder and CEO of Double Entry Bookkeeping. He has worked as an accountant and consultant for more than 25 years and has built financial models for all types of industries. He has been the CFO or controller of both small and medium sized companies and has run small businesses of his own. He has been a manager and an auditor with Deloitte, a big 4 accountancy firm, and holds a degree from Loughborough University.