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

2. Transaction Analysis

Journal Entries: Debits and Credits

Financial Accounting

2. Transaction Analysis

Journal Entries: Debits and Credits

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Multiple Choice

When a company receives cash for tuition fees in advance from students, which journal entry should be recorded?

Debit Unearned Revenue (Tuition); Credit Cash

Debit Cash; Credit Unearned Revenue (Tuition)

Debit Accounts Receivable; Credit Tuition Revenue

Debit Tuition Revenue; Credit Cash

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Verified step by step guidance

Understand the nature of the transaction: When a company receives cash for tuition fees in advance, it has not yet earned the revenue. This creates a liability called 'Unearned Revenue' because the company owes the service (tuition) to the students in the future.

Identify the accounts involved: The two accounts affected are 'Cash' (an asset account) and 'Unearned Revenue' (a liability account). Cash increases because the company receives money, and Unearned Revenue increases because the company has an obligation to provide tuition services later.

Determine the journal entry: In accounting, increases in assets (Cash) are recorded as debits, and increases in liabilities (Unearned Revenue) are recorded as credits. Therefore, the journal entry should be: Debit Cash; Credit Unearned Revenue.

Compare the options provided: The correct journal entry matches the option 'Debit Cash; Credit Unearned Revenue (Tuition)'. The other options are incorrect because they either misclassify the accounts or do not reflect the nature of the transaction.

Reinforce the concept: Unearned Revenue is a liability account, not a revenue account, because the company has not yet earned the tuition fees. Revenue is recognized only when the service is provided, not when cash is received in advance.