On December 1 2008 ABC received 6000 in advance for services

On December 1, 2008, ABC received $6,000 in advance for services to be performed over the next 12 months. The adjusting entry on December 31, 2008 is a:

a) debit to Cash and a credit to Unearned Revenue

b) debit to Fee Revenue and a credit to Unearned Revenue

c) debit to Unearned Revenue and a credit to Cash

d) debit to Unearned Revenue and a credit to Fee Revenue

None of the above

Refer to the previous question.   The amount of the adjusting entry is:

Solution

Ans a) debit to Cash and a credit to Unearned Revenue

Since cash is received, it is to be debited and income has been earned but it is unearned thus it is credited and transferred to unearned revenue account.

Rule:

Debit: Asset, expense

Credit: Liabilities, Income