An accountant who uses the accrual basis of accounting receives cash in advance for services yet to be performed. The entry to record this transaction will include a credit to which of the following accounts?

Question

Quizplus · Accepted Answer

The accrual basis of accounting requires revenue to be recognized when it is earned, not when cash is received. Therefore, when cash is received in advance of services being performed, it is recorded as a liability (unearned service revenue) until the services are actually performed and revenue can be recognized. A credit entry to Unearned Service Revenue (choice B) is appropriate in this situation.

An Accountant Who Uses the Accrual Basis of Accounting Receives