How does the adjusting entry to recognize the portion of the unearned revenue that a company earned during the accounting period affect the financial statements?
A)An increase in assets and a decrease in liabilities.
B)An increase in liabilities and a decrease instockholders' equity.
C)A decrease in liabilities and an increase instockholders' equity.
D)A decrease in assets and a decrease in liabilities.

Question

Quizplus · Accepted Answer

The adjusting entry to recognize the portion of unearned revenue that a company earned during the accounting period will decrease the unearned revenue (a liability) and increase the earned revenue (an equity account). This results in a decrease in liabilities and an increase in stockholders' equity on the balance sheet. There is no impact on assets.

How Does the Adjusting Entry to Recognize the Portion of the Unearned