On January 1, 2019, Tennis Club received a check from a member for $3,240, which represents dues for the next 18 months.
What effect will Tennis Club's adjusting journal entry at the end of the accounting period on December 31, 2019 have on their accounting equation?

Question

Quizplus · Accepted Answer

$3,240 x 12/18 = $2,160 = Membership Revenue in current year.
Original Entry: Cash $3,240
$\quad $ $\quad $ $\quad $ Unearned Revenue $3,240
(to record receipt of advance membership dues)
Year-end entry: 
Unearned Revenue $2,160
$\quad $ $\quad $ $\quad $ Membership Revenue $2,160
(to record membership revenue earned during year)
Unearned revenue is a liability, so liabilities decreased by $2,160 at the end of the year. Membership revenue is an income statement account, so it does not change assets or liabilities.

On January 1, 2019, Tennis Club Received a Check from a Member