State BPA Fundamental Accounting Practice Exam

How is Ticket Revenue recorded in financial statements?

1. Debit on the Balance Sheet

2. Credit on the Income Statement

3. Debit on the Income Statement

4. Credit on the Balance Sheet

The correct answer is: Credit on the Income Statement

Ticket revenue is recorded as a credit on the income statement because it represents earned income from ticket sales, which contributes to the overall revenue of a business. When a company sells tickets, it generates revenue that boosts its financial performance. This revenue is recognized in the income statement as it reflects the company's performance over a specific period. In accounting, revenues are recorded as credits because they increase the company's equity. This increase is an essential aspect of the accounting equation, where assets are equal to liabilities plus equity. Since ticket revenue directly impacts profitability, it helps provide stakeholders with insights into the company’s financial health and operational success. While revenues do eventually affect the balance sheet as retained earnings (a component of equity), the initial recording upon sale occurs in the income statement, thus influencing the company's profitability in that reporting period.