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 Revenue.
C)credit Unearned Revenue and debit Revenue.
D)debit Unearned Revenue and credit Accounts Receivable.

Question

Quizplus · Accepted Answer

When a business receives cash in advance of services being performed, it creates a liability called Unearned Revenue. The adjusting entry needed after the services are performed is to recognize the revenue earned by the business. To do this, the business needs to debit the Unearned Revenue account to decrease the liability and credit the Revenue account to increase the revenue. Therefore, the correct answer is to debit Unearned Revenue and credit Revenue (choice letter B).

If a Business Has Received Cash in Advance of Services