Kelly Rice has a large consulting practice. New clients are required to pay one-half of the consulting fees up front. The balance is paid at the conclusion of the consultation. How does Rice account for the cash received at the end of the engagement?
A) Cash Unearned Service Revenue
B) Cash Service Revenue
C) Prepaid Service Fees Service Revenue
D) No entry is required when the engagement is concluded.

Question

Quizplus · Accepted Answer

When the engagement is concluded and the balance is paid, it represents revenue earned by the consulting practice. Therefore, the cash received should be recorded as Cash Service Revenue. The other options (A and C) refer to prepaid or unearned revenue, which would not be appropriate in this scenario. Option D is incorrect because an entry is required to record the receipt of cash.

Kelly Rice Has a Large Consulting Practice