Question

On December 21 a law firm engages Smart Touch Learning to provide​ e-learning services and agrees to pay​ $600 in advance. When recording this​ transaction, Smart Touch Learning will

Answer 1

Smart Touch Learning will credit the 'Unearned Revenue' account and debit the 'Cash' account when recording the $600 received in advance for e-learning services.

Step-by-step explanation:

When Smart Touch Learning records the transaction of receiving $600 in advance for e-learning services from a law firm, it should recognize this payment as unearned revenue. Unearned revenue is a liability for the company because it represents a payment for services that have not yet been provided.

Since the company is obligated to perform these services or return the money, it is not recognized as revenue until the service is actually performed. Therefore, in the accounting records, Smart Touch Learning will credit the 'Unearned Revenue' account and debit the 'Cash' account to reflect this transaction.