Accounting for IGCSE & O level - Accounting Procedures (Section 11 - No. 49)
If a business receives cash from a customer for services to be provided in the future, how should this transaction be initially recorded?
Debit cash, credit service revenue.
Debit accounts receivable, credit service revenue.
Debit cash, credit unearned revenue.
Debit unearned revenue, credit cash.
Explanation
This creates a liability (unearned revenue) as the service has not yet been provided.
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