ABC Airlines collects $300 for a roundtrip ticket from Chicago to Los Angeles.The flights will not occur until the next accounting period.How does ABC Airlines record the $300 collected in advance?
A) A debit to Cash of $300 and a credit to Unearned Revenue of $300
B) A debit to Unearned Revenue of $300 and a credit to Cash of $300
C) A debit to Cash of $300 and a credit to Revenue of $300
D) A debit to Revenue of $300 and a credit to Cash of $300

Question

Quizplus · Accepted Answer

The $300 collected in advance is recorded as a debit to Cash (increasing assets) and a credit to Unearned Revenue (a liability) because the service has not yet been provided.

ABC Airlines Collects $300 for a Roundtrip Ticket from Chicago