The adjusting entry to record the amount earned that previously had been collected in advance will:
A)increase liabilities and increase revenues.
B)increase liabilities and decrease revenues.
C)decrease liabilities and increase revenue.
D)decrease liabilities and decrease revenues.

Question

Quizplus · Accepted Answer

An amount collected in advance means cash was collected before the revenue was earned.That transaction is recorded with a debit to Cash and a credit to Deferred Revenue,a liability.Later,the deferral adjustment is an adjusting entry that decreases the liability,Deferred Revenue,for the amount earned during the period and increases the related revenue account.

The Adjusting Entry to Record the Amount Earned That Previously