In a fictitious revenue scheme, which account is debited to balance the entry?

• A. Inventory
• B. Cash
• C. Accounts payable
• D. Accounts receivable

Answer: (D)

When revenue is recognized on credit, the entry increases Revenue with a credit and increases an asset with a debit to reflect the amount owed by customers. In a fictitious revenue scheme, the fraud usually creates a receivable that doesn’t actually exist, so the balancing debit goes to Accounts Receivable—the asset that represents money owed to the company. Debiting Cash would only be correct if cash had actually been received; debiting Inventory or Accounts Payable wouldn’t properly balance a revenue-on-credit entry. Therefore, Accounts Receivable is the appropriate debit to balance the entry.