Question

Deferred revenues represent liabilities recorded when cash is received from customers in advance of providing a good or service. What adjusting journal entry is required at the end of a period to recognize the amount of the furred revenues that were recognized during the period? a) Debit Deferred Revenue, Credit Revenue

b) Debit Revenue, Credit Deferred Revenue
c) Debit Cash, Credit Revenue
d) Debit Revenue, Credit Cash

Answer 1

The correct adjusting journal entry for recognizing deferred revenues that were earned during the period is Debit Deferred Revenue, Credit Revenue. This moves the amount from liability to revenue as the service or good is provided. So the correct answer is option A.

Step-by-step explanation:

The correct adjusting journal entry to recognize the amount of deferred revenues that were recognized during the period is a) Debit Deferred Revenue, Credit Revenue. When a company receives payment in advance for goods or services, it records the cash receipt as a liability called deferred revenue.

As the company earns the revenue by delivering the goods or providing the service, it needs to adjust the accounts to reflect that the revenue has been earned. The adjusting entry is thus made to decrease the deferred revenue account and increase the revenue account, recognizing the income on the income statement.

When cash is received in advance from customers, it is recorded as a liability called deferred revenue. As the goods or services are provided, the deferred revenue is recognized as revenue. To reflect this recognition, we need to debit the Deferred Revenue account and credit the Revenue account.