Spafford Services,Inc.provides services to clients.On May 1,a client prepaid Spafford Services $30,000 for 6-months services in advance.Spafford Services' general journal entry to record this transaction will include a:
A)Debit to Unearned Management Fees for $30,000.
B)Credit to Management Fees Earned for $30,000.
C)Credit to Cash for $30,000.
D)Credit to Unearned Management Fees for $30,000.
E)Debit to Management Fees Earned for $30,000.

Question

Quizplus · Accepted Answer

The transaction involves receiving cash in advance for services yet to be provided, which is a liability. Therefore, Spafford Services should credit the liability account of Unearned Management Fees. The debit entry would be to Cash.