Accounting for IGCSE & O level - The Fundamentals Of Accounting (Section 18 - No. 44)
When a company receives cash from a customer in advance for services to be performed in the future, what is the correct journal entry?
Debit Cash, Credit Service Revenue
Debit Cash, Credit Unearned Revenue
Debit Accounts Receivable, Credit Service Revenue
Debit Unearned Revenue, Credit Cash
Explanation
Cash increases (debit) and Unearned Revenue (a liability) increases (credit) because the company has an obligation to provide the service.
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