The proper adjusting entry to record income earned on a contract for which the customer has previously prepaid in full is:
a.Unearned/deferred revenue xx
Cash xx
b.Cash xx
Unearned/deferred revenue xx
c.Revenue xx
Unearned/deferred revenue xx
d.Unearned/deferred revenue xx
Revenue xx
Solution :
The Answer is (d)
Unearned/deferred revenue | xxx | |
Revenue | xxx |
Explanation :
(a) at the time of payment the company passes the following entry :
Cash | xxx | |
Revenue (for booking the part of work completed) | xxx | |
Unearned Revenue (for booking the part of work yet to be completed) | xxx |
(b) Now after completing the contract the company will book the revnue for balance part :
Unearned Revenue | xxx | |
Revenue | xxx |
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