Right Style received a $1000 advance payment from a customer for work to be carried out in the next accounting period. Which of the following is the correct accounting entry to initially record the $1000?
A) Debit bank $1000; credit unearned income $1000
B) Debit unearned income $1000; credit bank $1000
C) Debit bank $1000; credit accounts payable $1000
D) Debit income earned $1000; credit bank $1000

Question

Quizplus · Accepted Answer

When Right Style receives a $1000 advance payment, it should debit the bank account to reflect the increase in cash. The credit entry goes to unearned income, indicating a liability to perform services or deliver goods in the future. This entry correctly reflects the receipt of cash before earning the income.

Right Style Received a $1000 Advance Payment from a Customer