When a magazine company receives advance payment for a subscription, what is the required journal entry to be recorded?
A) Cash - Debit; Unearned Subscriptions Revenue - Credit
B) Prepaid Subscriptions - Debit; Cash - Credit
C) Cash - Debit; Subscriptions Revenue - Credit
D) Unearned Subscriptions Revenue - Debit; Cash - Credit

Question

Quizplus · Accepted Answer

When a magazine company receives advance payment for a subscription, the company has not yet earned the revenue. This means the Cash account is debited for the amount of cash received, and the liability account Unearned Subscriptions Revenue is credited. This liability account represents the obligation the company has to provide the subscriptions in the future.

When a Magazine Company Receives Advance Payment for a Subscription