Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

3. Accrual Accounting Concepts

Adjusting Entries: Unearned Revenue

Financial Accounting

3. Accrual Accounting Concepts

Adjusting Entries: Unearned Revenue

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Multiple Choice

When The Home Depot provides services that were previously paid for with a gift card (recorded as unearned revenue), which adjusting journal entry should be made?

Debit Unearned Revenue; Credit Service Revenue

Debit Service Revenue; Credit Unearned Revenue

Debit Unearned Revenue; Credit Cash

Debit Cash; Credit Service Revenue

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Verified step by step guidance

Understand the concept of unearned revenue: Unearned revenue represents money received by a company for services or goods that have not yet been provided. It is recorded as a liability because the company owes the service or product to the customer.

Identify the transaction: In this case, The Home Depot is providing services that were previously paid for with a gift card. This means the company is fulfilling its obligation, and the unearned revenue should be reduced.

Determine the accounts involved: The unearned revenue account (a liability) will decrease because the obligation has been fulfilled, and the service revenue account (an income account) will increase to reflect the revenue earned from providing the service.

Formulate the journal entry: To decrease unearned revenue, you debit the Unearned Revenue account. To increase service revenue, you credit the Service Revenue account.

Write the adjusting journal entry: Debit Unearned Revenue and Credit Service Revenue to reflect the fulfillment of the obligation and recognition of earned revenue.