If a Business Has Received Cash in Advance of Services

question 16

Multiple Choice

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

• A) debit Unearned Revenue and credit Cash.
• B) debit Unearned Revenue and credit Sales.
• C) credit Unearned Revenue and debit Sales.
• D) debit Unearned Revenue and credit Accounts Receivable.

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Definitions:

Balance Sheet

A financial statement that presents the assets, liabilities, and equity of a company at a specific point in time, giving a snapshot of its financial condition.

Liabilities

Financial obligations or debts that a company owes to others, such as loans, accounts payable, and mortgages.

Purchasing Policy

The price and timing of raw materials and other goods and services necessary to build, sell, and support products.

Compensation

The payment or benefit given to someone in exchange for services or as a recompense for losses.