Question

How should the firm record the fee for accounting services received in advance for a one-year period, $7,200, on the July 31 trial balance?

A) Debit Service Revenue, credit Cash.
B) Debit Cash, credit Unearned Revenue.
C) Debit Accounts Receivable, credit Service Revenue.
D) Debit Unearned Revenue, credit Cash.

Answer 1

To record the $7,200 fee for accounting services received in advance, the firm should debit Cash and credit Unearned Revenue on the July 31 trial balance.

Step-by-step explanation:

To record the $7,200 fee for accounting services received in advance, the firm should debit Cash and credit Unearned Revenue on the July 31 trial balance.The correct way to record the fee for accounting services received in advance for a one-year period, totaling $7,200, on the July 31 trial balance is B) Debit Cash, credit Unearned Revenue.

This accounting entry reflects that the firm has received cash for services it has yet to perform, creating a liability known as Unearned Revenue. Over the course of the year, as the services are rendered, the firm will recognize the revenue by debiting Unearned Revenue and crediting Service Revenue.