Which of the following journal entries is appropriate when a company receives payment in advance for goods or services?
A) Debit Cash and credit an expense account
B) Credit Cash and debit a revenue account
C) Debit Cash and credit a liability account or a revenue account
D) Credit Cash and debit a liability or revenue account

Question

Quizplus · Accepted Answer

When a company receives payment in advance for goods or services, it should debit Cash (to increase the asset) and credit a liability account (to recognize the obligation to provide goods or services in the future) or a revenue account if the revenue recognition criteria are met at the time of payment. However, typically, the credit is to a liability account, such as Unearned Revenue or Deferred Revenue, until the goods or services are delivered.

Which of the Following Journal Entries Is Appropriate When a Company