If a Business Has Received Cash in Advance of Services

question 235

Multiple Choice

If a business has received cash in advance of services performed and credits a liability account the adjusting entry needed after the services are performed will be

• A) debit Unearned Service Revenue and credit Cash.
• B) debit Unearned Service Revenue and credit Service Revenue.
• C) debit Unearned Service Revenue and credit Prepaid Expense.
• D) debit Unearned Service Revenue and credit Accounts Receivable.

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Definitions:

Annual Depreciation

The portion of the cost of a fixed asset that is expensed each year over its useful life as a way to allocate the cost over time.

Useful Life

The estimated period that an asset is expected to be usable for the purpose for which it was acquired, affecting its depreciation or amortization.

AASB 116

An Australian accounting standard that outlines the accounting treatment for property, plant, and equipment including recognition, depreciation, and impairment.

Revaluations

The process of adjusting the book value of a capital asset or currency to its current market value.