If a painting company receives $80,000 in advance for services to be performed in both the present fiscal period and the following fiscal period, the best entry would be
A)debit Cash; credit Painting Revenue.
B)debit Cash; credit Accounts Payable.
C)debit Cash; credit Unearned Painting Revenue.
D)debit Cash; credit Other Income.
E)debit Painting Revenue; credit Unearned Painting Revenue.

Question

Quizplus · Accepted Answer

The best entry would be to debit Cash and credit Unearned Painting Revenue because the company has received payment in advance for services that have not yet been performed. This creates a liability on the company's balance sheet, which is represented by the Unearned Painting Revenue account. As the company performs the painting services, the Unearned Painting Revenue account will be credited and the Painting Revenue account will be debited, recognizing the revenue earned.

If a Painting Company Receives $80,000 in Advance for Services