A law firm collected $3,600 for work to be performed in the following month. Which of the following general journal entries will the firm make to record this transaction?

a. Debit Accounts Receivable, $3,600; credit Unearned Legal Fees Revenue, $3,600.

b. Debit Cash, $3,600; credit Unearned Legal Fees Revenue, $3,600.

c. Debit Legal Fees Revenue, $3,600; credit Accounts Receivable, $3,600.

d. Debit Accounts Receivable, $3,600; credit Legal Fees Revenue, $3,600.

e. Debit Cash, $3,600; credit Accounts Receivable, $3,600.

Question

Business

Clare Hodges

7 March, 12:40

A law firm collected $3,600 for work to be performed in the following month. Which of the following general journal entries will the firm make to record this transaction?

a. Debit Accounts Receivable, $3,600; credit Unearned Legal Fees Revenue, $3,600.

b. Debit Cash, $3,600; credit Unearned Legal Fees Revenue, $3,600.

c. Debit Legal Fees Revenue, $3,600; credit Accounts Receivable, $3,600.

d. Debit Accounts Receivable, $3,600; credit Legal Fees Revenue, $3,600.

e. Debit Cash, $3,600; credit Accounts Receivable, $3,600.

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Answers (1)

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Korbin Strickland · Answer 1

b. Debit Cash, $3,600; credit Unearned Legal Fees Revenue, $3,600

Explanation:

Cash Collected in advance against the service to be performed in the following month is actually an unearned revenue and it is considered as liability when it is received. The revenue will be recognized in the following month and balance will be transferred from unearned revenue to revenue account.

As cash is received so it will be debited due to its debit nature and A liability of unearned revenue is created so it will be created due the credit nature of liability account.