If a business has received cash in advance of services performed and increases a liability account the adjustment needed after the services are performed will be:

Question

Quizplus · Accepted Answer

When services are performed, the liability account for Unearned Service Revenue decreases as now the revenue is earned and should be recognized as Service Revenue. The Cash account does not change as the business has already received the cash in advance. Therefore, the correct adjustment is to decrease Unearned Service Revenue and increase Service Revenue.

If a Business Has Received Cash in Advance of Services