Utah Contractor Practice Exam 2026 - Free Contractor License Practice Questions and Study Guide

An income journal records all transactions related to revenue generation, capturing both the funds received and the corresponding accounts affected in a systematic manner. In accounting, each transaction will typically involve a credit to the income account as revenue is recognized, and a corresponding debit to either cash or accounts receivable, depending on whether the income is received immediately or to be collected later.

The principle that governs this is the double-entry accounting system, where every transaction is recorded with equal debits and credits to maintain the accounting equation's integrity: Assets = Liabilities + Equity. This ensures that the financial statements accurately reflect the company's financial position. When reflecting these transactions in the income journal, the equal value of debits (money received or owed) and credits (recognized income) enhances the reliability and transparency of financial reporting. Thus, the correct characteristic of an income journal is that it maintains a balanced approach with credits and debits of equal value.