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:

Initial Purchase

The first acquisition of a good or service by a consumer, often marking the beginning of the consumption experience.

Income Elasticity of Demand

An indicator of the variation in demand for a product based on changes in consumer income.

Used Clothing

Clothing that has been previously worn and is often sold at lower prices than new clothing; it's part of the second-hand market.

Income Elasticity of Demand

A measure of how much the quantity demanded of a good changes as a consumer's income changes.