Final answer:
To record the receipt of $14,400 cash received in advance, debit Cash and credit Unearned Revenue. This represents deferred revenue as the company is obligated to provide goods or services later.
Step-by-step explanation:
When a company records the receipt of cash received in advance from customers, it is handling what is known as deferred revenue or unearned revenue. In the given scenario, a cash amount of $14,400 is received. To record this in the books, an accountant would make a double entry: a debit to the Cash account and a credit to the Unearned Revenue account. This is because the company has the obligation to deliver goods or services at a later date for the cash received.
The entry in the company's ledger would look something like this:
- Debit: Cash $14,400
- Credit: Unearned Revenue $14,400
This ensures that financial statements accurately reflect the liability associated with the cash that cannot be recognized as revenue until the service is performed or the goods are delivered.