Accounting for IGCSE & O level - Preparation Of Financial Statements (Section 25 - No. 39)
What is the result when the business receives cash for goods sold but the revenue recognition principle dictates it should not be immediately recognized?
Debit Cash and credit Sales Revenue.
Debit Accounts Receivable and credit Sales Revenue.
Debit Cash and credit Unearned Revenue.
Debit Unearned Revenue and credit Cash.
Explanation
Cash increases, but the revenue isn't earned yet. Unearned revenue is a liability.
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