Question

Grossing Inc. receives $10,000 in advance this month for work to be performed next month. This month, the company should record a journal entry that includes a debit to:

Answer 1

Grossing Inc. should debit Cash and credit Unearned Revenue for $10,000 upon receiving the advance payment for future work.

Step-by-step explanation:

When Grossing Inc. receives $10,000 in advance for work to be performed in the future, the accounting entry made this month should include a debit to Cash for $10,000 because the company has received cash. Concurrently, a credit to Unearned Revenue or Deferred Revenue for $10,000 is recorded. This is because the company has a liability to perform services or deliver goods in the future, and the payment received is essentially a promise to complete this work.