Question

If a business has received cash in advance of services performed and credits a liability account, the adjusting entry needed after the services are performed will be:

a. Debit Unearned Revenue and credit Cash
b. Debit Unearned Revenue and credit Revenue Earned
c. Debit Unearned Revenue and credit Prepaid Expense
d. Debit Unearned Revenue and credit Accounts Receivable Pixel company sold inventories on account for $900.

Answer 1

The correct adjusting entry for a cash advance received for services is to debit Unearned Revenue and credit Revenue. The accounting profit for a firm, given its revenues and explicit costs, is $50,000.

Step-by-step explanation:

When a business receives cash in advance for services, it records the cash as a liability under an account typically titled Unearned Revenue. After the services are performed, the business needs to recognize that revenue. The correct adjusting entry in this situation would be to debit the Unearned Revenue account, which decreases the liability, and credit the Revenue account (not Accounts Receivable) to recognize the earned revenue.

In response to the self-check question presented, a firm's accounting profit is calculated by subtracting the explicit costs from the total revenues. Given the numbers provided, the accounting profit would be: $1,000,000 in sales revenue minus the sum of costs ($600,000 labor + $150,000 capital + $200,000 materials), resulting in an accounting profit of $50,000.