What business event would be represented by a journal entry that shows a debit to cash of $500 and a credit to unearned revenue of $500?
A) Cash has been paid out to a company that will rent the company space in the future.
B) The company has provided services to a customer, and the cash account has been increased.
C) Cash has been received by the company for services that have not yet been provided.
D) The company has refunded money to a customer, because the company did not provide the services it promised.

Question

Quizplus · Accepted Answer

This journal entry represents the receipt of cash for services that have not yet been provided, which is accounted for as unearned revenue. This is common in industries such as subscription-based services or prepaid warranties. The $500 debit to cash indicates the receipt of cash, while the $500 credit to unearned revenue indicates an increase in liability as the company owes the customer future services.

What Business Event Would Be Represented by a Journal Entry