On May 25, Yellow House Company received a $650 check from Grizzly Bean for services to be performed in the future.The bookkeeper for Yellow House Company incorrectly debited Cash for $650 and credited Accounts Receivable for $650.The amounts have been posted to the ledger.To correct this entry, the bookkeeper should:

Question

Quizplus · Accepted Answer

Since the payment was received for services that have not yet been performed, it should be recorded as Unearned Service Revenue instead of Accounts Receivable. The incorrect entry debited Cash and credited Accounts Receivable, so the correct entry would be to debit Accounts Receivable (to remove the incorrect credit) and credit Unearned Service Revenue (to correctly record the payment for services to be performed in the future).

On May 25, Yellow House Company Received a $650 Check