On January 1, Fitness Company received a check from a member for $540, which represents dues for the next 18 months. What effect will Fitness Company's adjustment at the end of the accounting period on December 31 have on their accounting equation?

Question

Quizplus · Accepted Answer

The adjustment will decrease liabilities by $360 because the company will recognize $360 of the dues as earned revenue for the year, reducing the unearned revenue liability.

On January 1, Fitness Company Received a Check from a Member