A law firm collected $1,800 in advance for work to be performed in three months.Which of the following general journal entries will the firm make to record this transaction?
A)Debit Accounts Receivable,$1,800; credit Unearned Legal Fees Revenue,$1,800.
B)Debit Cash,$1,800; credit Unearned Legal Fees Revenue,$1,800.
C)Debit Legal Fees Revenue,$1,800; credit Accounts Receivable,$1,800.
D)Debit Accounts Receivable,$1,800; credit Legal Fees Revenue,$1,800.
E)Debit Cash,$1,800; credit Accounts Receivable,$1,800.

Question

Quizplus · Accepted Answer

The law firm collected $1,800 in advance, which means it received cash. Therefore, the entry should include a debit to Cash. At the same time, the law firm has not yet earned the revenue, so it should credit the liability account Unearned Legal Fees Revenue.

A Law Firm Collected $1,800 in Advance for Work to Be