Final answer:
The original accounting entry for receiving payment in advance is a debit to cash and a credit to unearned revenue. When the service is provided in a later period, an adjusting entry is made, debiting unearned revenue and crediting revenue, to reflect the earned income.
Step-by-step explanation:
When a company receives payment in advance for work that will be performed in a future accounting period, the original entry would reflect the receipt of cash and the obligation to provide services or goods in the future. The pattern of the original entry would be to debit cash (an asset account) and credit unearned revenue (a liability account). This is because the company has received cash, increasing its assets, but it also has a liability as it owes the service or product.
When the period in which the work is actually performed arrives, an adjusting entry is made to recognize the revenue earned. The pattern of the adjusting entry is to debit unearned revenue and credit revenue (an income statement account). By performing this adjustment, the liability is reduced as the obligation is fulfilled, and the company recognizes the income it has earned from providing the service or product.