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A law firm has received $10,000 for services to be performed in the future.

which category would you put the entry to adjust the accounts involved (Service Revenues and Unearned Revenues)?

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Question added by abdelaziz allam , محاسب اول , شركة كامبردج مصر للاستثمار التعليمي ش.م.م
Date Posted: 2016/02/20
Frank Mwansa
by Frank Mwansa , ACCOUNTING LECTURER , FREELANCER

Unearned income represents revenue already collected but not yet earned. Unearned income should not be included as income yet, but should be recorded as a liability. It represents an obligation of the company to render services in the future

Under the liability method, a liability account is recorded when the amount is  collected.

So the Unearned revenue account will be credited with the amount received by the law firm.

At the end of the of each or period , unearned revenue must be checked and adjusted if  necessary.

For the law firm the entries will be debit unearned revenue and credit services revenue with the amount earned for the period.

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