Practice Quiz

MTEL Business Practice Exam

Category - Business Operations

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On May 31, Hadrian Trading Services issued an invoice to Jonathan Smith for brokerage commissions in the amount of $2,000. A month later, Smith sent a partial payment in the amount of $1,000. When recording the payment, the accountant of Hadrian Trading Services should credit which of the following accounts for the amount of $1,000?
  1. Revenue commissions.
  2. Cash.
  3. Accounts receivable.
  4. Provision for bad debts.
Explanation
Correct Response: C. The partial payment for brokerage commission is recorded as a credit in accounts receivable. Revenue commission is based on commissions earned by Hadrian Trading Services, not Jonathan Smith, and would not be credited in this account (A). Since the brokerage commission is a credit in accounts receivable, it will be a debit in the cash account (B). A provision for bad debt, also known as an uncollectible account expense, is not an outstanding brokerage commission (D).
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