Question

A dance studio received $3,500 cash for services to be rendered in the future. The full amount was credited to the liability account Unearned Service Revenue. If the services have been rendered at the end of the accounting period and no adjusting entry is made, this would cause ________

Answer 1

Answer:

Revenue to be understated

Explanation:

Since the cash is received for rendering the services in the future for $3,500

If no adjusting entry is made it will lead to the understated of the revenue account and overstatement of liabilities account

Plus the adjusting entry would be

Unearned Service Revenue A/c Dr

         To Service revenue

(Being the unearned service revenue is recorded)