Question

Adjustments for unearned revenues: Select one: a. decrease liabilities and increase revenues. b. increase liabilities and increase revenues. c. increase assets and increase revenues. d. decrease revenues and decrease assets.

Answer 1

Answer:

(D) decrease revenues and decrease assets

Explanation:

Since the revenue is unearned, its entry in the books needs to be reversed.

When a revenue was recorded in the books, the like journal entry would have been.

Debit Cash/Bank/Receivables Account (thus increasing asset)

Credit Revenue Account (thus increasing revenue)

There, reversing the entry will involve decreasing revenue and decreasing asset.