Question

What is the journal entry for subscription revenue collected in advance?

Answer 1

The journal entry for subscription revenue collected in advance involves debiting Cash and crediting Unearned Revenue.

Step-by-step explanation:

The journal entry for subscription revenue collected in advance would be:

1. Debit: Cash (Asset)
2. Credit: Unearned Revenue (Liability)

In this journal entry, we debit (increase) the Cash account because we have received cash from customers in advance. We credit (increase) the Unearned Revenue account because we have an obligation to provide the service in the future.

When the service is provided, the Unearned Revenue is recognized as revenue, and we would update the journal entry accordingly.

Answer 2

The journal entry for subscription revenue collected in advance involves recording the revenue as a liability until it is earned.

Step-by-step explanation:

The journal entry for subscription revenue collected in advance involves recording the revenue as a liability until it is earned. Here's the step-by-step process:

1. Debit the Cash or Accounts Receivable account to reflect the receipt of cash or the amount due from the customer.
2. Credit the Unearned Subscription Revenue account to record the liability or obligation to provide future services.

When the service is provided or the subscription period is over, you would record an adjusting entry to recognize the revenue earned and remove the liability.

For example, assume a company collects $1,200 in advance for a 12-month subscription. The journal entry would be:

• Debit Cash (or Accounts Receivable) $1,200
• Credit Unearned Subscription Revenue $1,200