Tocca Co. collected a $5,000 cash advance from a customer on November 1, 2013 for work to be performed over a six-month period beginning on that date. If the year-end adjustment is properly recorded, what will be the effect on Tocca's 2013 financial statements?
A)Increase assets and increase liabilities
B)Increase assets and increase revenues
C)Decrease liabilities and increase revenues
D)No effect

Question

Quizplus · Accepted Answer

The adjusting entry to recognize revenue earned on the contract will increase revenues and decrease liabilities (unearned revenue).

Tocca Co Collected a $5,000 Cash Advance from a Customer on on November