A Legal fiRm Received $2,000 Cash for Legal Services to Be

question 125

Multiple Choice

A legal firm received $2,000 cash for legal services to be rendered in the future. The full amount was credited to Unearned Service Revenue. If the legal services have been provided at the end of the accounting period and no adjusting entry is made, this would cause

• A) expenses to be overstated.
• B) profit to be overstated.
• C) liabilities to be understated.
• D) revenues to be understated.

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Definitions:

Adjusted Trial Balance

A list of all accounts and their balances after adjustments have been made for errors, accruals, and deferrals, used to prepare financial statements.

Income Statement

A report detailing a business's income, expenditures, and net earnings or losses for a given time frame.

Adjusted Trial Balance

is a list of all accounts and their balances after making adjustments, used to verify the equality of debits and credits.

Net Income

The income a company retains following the subtraction of all costs and taxes from its total revenue.