When a company sells services in which cash will not be received until some future date, the company should credit an unearned revenues account for the amount charged to the customer.

Question

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When a company sells services but will not receive cash until a future date, it should credit a revenue account (e.g., Service Revenue) and debit an accounts receivable account, not an unearned revenues account. Unearned revenues are used when the company receives cash before services are performed.

When a Company Sells Services in Which Cash Will Not