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

Which of the following is an example of a deferral adjusting entry related to unearned revenue?

Estimating bad debt expense for the period

Recognizing revenue that was previously recorded as unearned when the service is performed

Recording accrued salaries at the end of the period

Recording depreciation expense for equipment

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Verified step by step guidance

Understand the concept of deferral adjusting entries: These are adjustments made to defer or postpone the recognition of revenue or expenses to the appropriate period. In this case, we are dealing with unearned revenue, which is a liability until the service is performed.

Identify the nature of unearned revenue: Unearned revenue represents cash received in advance for services or goods that have not yet been provided. It is initially recorded as a liability because the company owes the service or product to the customer.

Recognize the adjustment needed: When the service is performed or the goods are delivered, the company needs to adjust the unearned revenue account by reducing the liability and recognizing the revenue in the income statement.

Determine the journal entry for the adjustment: The adjusting entry would involve debiting the Unearned Revenue account (to decrease the liability) and crediting the Revenue account (to recognize the earned revenue).

Relate this to the correct answer: The correct example of a deferral adjusting entry related to unearned revenue is 'Recognizing revenue that was previously recorded as unearned when the service is performed.' This aligns with the process of adjusting unearned revenue to reflect earned revenue.