On 27 September 2019, a builder received an advance of $50 000 from a client for future work. The work was completed to the client's satisfaction on 3 December 2019. What is the journal entry made by the builder on 3 December 2019?

Question

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The builder received an advance of $50 000 from the client on 27 September 2019. This advance was recorded as unearned revenue. When the work was completed on 3 December 2019, the builder should recognize the revenue earned by debiting the unearned revenue account and crediting the sales revenue account. Hence, the journal entry made by the builder on 3 December 2019 is DR Unearned revenue CR Sales revenue.

On 27 September 2019, a Builder Received an Advance of $50