On July 7, 2012, Saints Inc. received $10,000 in cash from a customer for services to be provided on October 10, 2012. Which of the following describes how the transaction should be recorded on July 7, 2012?

Question

Quizplus · Accepted Answer

When a customer pays in advance for services that will be provided in the future, the payment should be recorded as unearned revenue on the date received. This is because the company has not yet earned the revenue and owes the customer a service. Therefore, the correct entry for the transaction would be to debit Cash $10,000 and credit Unearned Revenue $10,000.