Explain Why a $500 Revenue Collected in Advance for Service

question 13

Essay

Explain why a $500 revenue collected in advance for service would be recorded as a debit to cash and a credit to a liability account.

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Definitions:

Invested Assets

Assets that are purchased or acquired for the purpose of generating income or appreciating in value, such as stocks, bonds, and real estate.

Net Income

The total earnings of a company after subtracting all expenses, taxes, and losses from total revenue, indicating the firm's profitability over a specific period.

Investment Turnover

A measure of the efficiency with which a company or portfolio generates revenue from its investments, calculated as sales divided by average invested assets.

Return On Investment

An evaluation tool for assessing the profit or efficiency of an investment, which involves dividing the investment's net profit by its cost.