Final answer:
The adjusting entry for improperly recorded unearned service revenues involves debiting Service Revenues and crediting Unearned Service Revenues, ensuring the revenues are recognized when earned.
Step-by-step explanation:
When unearned service revenues are initially recorded as service revenues, the adjusting entry to recognize unearned service revenues at the end of an accounting period includes debiting Service Revenues and crediting Unearned Service Revenues. For example, if a company received payment in advance for services that have not yet been provided, the revenue cannot be recognized at the time of receipt because the earning process is not complete. The adjusting entry ensures financial statements reflect the reality that the revenue is still unearned and therefore should not be included in the income statement as part of the current period's earnings.
At the end of the period, the unearned amount must be removed from the Service Revenues account and included in the Unearned Service Revenues liability account, on the balance sheet, until the service is provided. This practice follows the accounting principle of revenue recognition, which states that revenues are recognized when earned, regardless of when the cash is received. The transaction will be recorded using the correct accounts to maintain the accuracy of the financial statements.