In January the All Irie Resort books and accepts a cash paym

In January, the All Irie Resort books and accepts a cash payment for $32,000 for vacation services to be provided during spring break in March. The journal entry recorded in January will include a debit to:

Accounts Receivable and a credit to Service Revenue.

Accounts Payable and a credit to Service Revenue.

Prepaid Expenses and a credit to Service Revenue.

Cash and a credit to Unearned Revenue.

Solution

The correct answer is :

Cash and a credit to Unearned Revenue.

Note : Since Cash is an asset , inflow of cash would result in an increase in asset and hence, cash is debited. Unearned Revenue is credited because the service is yet to be perfomed.