Accounting for IGCSE & O level - The Fundamentals Of Accounting (Section 43 - No. 31)
What is the journal entry required when a prepaid income becomes earned?
Debit Prepaid Income, Credit Income.
Debit Income, Credit Prepaid Income.
Debit Cash, Credit Prepaid Income.
Debit Prepaid Income, Credit Cash.
Explanation
As the service is performed or good is provided, the prepaid income becomes earned income, and this is recognized by debiting the prepaid account and crediting the income account.
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