A legal ﬁrm received $2,000 cash for legal services to be rendered in the future. The full amount was credited to Unearned Service Revenue. If the legal services have been provided at the end of the accounting period and no adjusting entry is made, this would cause

Question

Quizplus · Accepted Answer

When the legal services are provided, the amount should be recognized as revenue. Without the adjusting entry to move the $2,000 from Unearned Service Revenue (a liability account) to a revenue account, revenues will be understated because the earned revenue has not been recorded in the income statement.

A Legal ﬁRm Received $2,000 Cash for Legal Services to Be