On August 1, 2013, Genuine Services accepted a $6,000 advance payment from a customer for services to be provided in the future. The contract requires the company to review operations at each of the customer's six locations over the next 6 months. What is the impact on the accounting equation of recording this transaction on August 1st?

Question

Quizplus · Accepted Answer

Recording the transaction would increase the company's assets (cash) by $6,000, as well as increase its liabilities (unearned revenue) by the same amount. The equation would be:

Assets = Liabilities + Stockholders' Equity 
+$6,000 = +$6,000 (unearned revenue) + 0 (since no service has been provided yet)

On August 1, 2013, Genuine Services Accepted a $6,000 Advance