Summer Leasing received $12,000 for 24 months rent in advance.How should Summer record this transaction?

Question

Quizplus · Accepted Answer

Summer Leasing received cash in advance for rent that has not yet been earned. Therefore, this transaction should be recorded as a debit to Cash and a credit to Unearned Revenue, which is a liability account. Over the next 24 months, as rent is earned each month, an adjusting entry will be made to reduce the Unearned Revenue account and recognize the rental revenue.

Summer Leasing Received $12,000 for 24 Months Rent in Advance