Which transaction would cause an increase to the balance of a revenue account?

Question

Options

• AIncoming payment
• BCapitalization
• CA/R invoice
• DA/R credit memo

• A
  5% (2)
• B
  15% (6)
• C
  73% (30)
• D
  7% (3)

Explanation

An A/R (Accounts Receivable) invoice is issued when a company sells goods or services on credit, and the journal entry credits the revenue account - which, having a normal credit balance, causes it to increase. This is the point of revenue recognition, not when cash is collected.

An incoming payment (A) is a cash receipt that settles the A/R balance (debit Cash, credit A/R) - revenue was already recorded at invoicing, so no revenue account is touched. Capitalization (B) converts an expenditure into a long-term asset, affecting asset accounts, not revenue. An A/R credit memo (D) does the opposite of an invoice - it debits revenue and credits A/R, which reduces the revenue balance, typically for returns or corrections.

Memory tip: Follow the sales cycle - the invoice creates the revenue; payment just converts A/R to cash. If you see "credit memo," flip the invoice logic, meaning revenue goes down.

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