Company A receives $10,000 in advance this month for work to be performed next month.This month,the company should:

Question

Quizplus · Accepted Answer

This scenario depicts the receipt of unearned revenue, where the company receives payment in advance for work that will be performed in the future. Hence, the correct entry is to debit Cash and credit Unearned Revenue. Option A is incorrect since it records the receipt of inventory and recognition of sales revenue, which makes no sense in this context. Option C is wrong since it records the receipt of inventory and liability for payment, which is not applicable here. Option D records an incorrect entry that increases the company's accounts payable, which is not relevant in this case.

Company a Receives $10,000 in Advance This Month for Work