“On December 1, ABC company received $10,000 from a customer for consulting services to be given for the following two months.” Considering the transaction given above, the accountant of ABC company made the following journal entry on December 31: ---------------------------------- / ---------------------------------- Unearned Service Revenue $10,000 Service Revenue $10,000 ----------------------------------------------------------------------- Is the journal entry recorded on December 31 accurate? If not, what is the correct entry? Explain your answer based on the basic accounting concepts/assumptions.
Service Revenue $10,000
Unearned service $10,000
When amount is received in advance for rendering service, the entry written might have been:
Cash 10,000
Service Revenue. 10,000
It must be recognized as revenue only when the service is actually rendered. Till then it is a deferred revenue and shown as a liability in the Balance Sheet.
It is revenue on the income statement when service is rendered to the customer. If the service is not delivered as agreed, the company may owe the amount back to the customer.
Get Answers For Free
Most questions answered within 1 hours.