A company performs 20 days of work on a 30-day contract before the end of the year. The total contract is valued at $6,000 and payment is not due until the contract is fully completed. The required adjusting entry includes a $4,000 debit to Unearned Revenue.

Question

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The adjusting entry should recognize the revenue earned for the 20 days of work completed, which is $4,000 (20/30 of $6,000), as a debit to Accounts Receivable or Revenue, not Unearned Revenue. Unearned Revenue is used when payment is received before work is performed.

A Company Performs 20 Days of Work on a 30-Day