Company A receives $10,000 in advance this month for work to be performed next mo nth. This month, the company should:
A) Debit Cash $10,000 and credit Service Revenue $10,000.
B) Debit Cash $10,000 and credit Unearned Revenue $10,000.
C) Debit Cash $10,000 and credit Accounts Payable $10,000.
D) Debit Accounts Payable $10,000 and credit Cash $10,000.

Question

Quizplus · Accepted Answer

Since Company A has received $10,000 in advance for work to be performed next month, it is considered unearned revenue. Therefore, the company should debit Cash $10,000 and credit Unearned Revenue $10,000 to indicate that they have received the money but have not yet earned it as revenue.

Company a Receives $10,000 in Advance This Month for Work