Teton Tax Service collects $440 for preparation of a tax return.The tax return will not be complete until the next accounting period.How does Teton record the $440 collected in advance?
A)A debit to Cash of $440 and a credit to Deferred Revenue of $440.
B)A debit to Deferred Revenue of $440 and a credit to Cash of $440.
C)A debit to Cash of $440 and a credit to Revenue of $440.
D)A debit to Revenue of $440 and a credit to Cash of $440.

Question

Quizplus · Accepted Answer

When the $440 is collected,the company will record a debit to Cash (to increase that asset account)and a credit to Deferred Revenue (to increase that liability account).

Teton Tax Service Collects $440 for Preparation of a Tax