5 Questions
Which of the following is an adjusting journal entry resulting from an accrual?
Accounts receivable; service revenue
What is the effect of initially recording deferred revenue when cash is received from a customer?
Liabilities are not affected
In an adjusting journal entry, which of the following pairs is involved in recognizing interest earned but not yet received?
Interest receivable; interest revenue
When cash is received from a customer in advance for services that will be provided later, which of the following accounts is affected?
Prepaid rent
Which of the following is true about deferred revenue?
It represents revenue earned but not yet received
Study Notes
Adjusting Journal Entries and Accruals
- An adjusting journal entry resulting from an accrual is one that recognizes revenue earned but not yet received or expenses incurred but not yet paid.
Deferred Revenue
- When cash is received from a customer in advance for services that will be provided later, the Deferred Revenue account is affected.
- Deferred revenue is a liability account that represents payment received from customers for goods or services that have not yet been provided.
- Deferred revenue is initially recorded when cash is received from a customer, and it is gradually reduced as the services are provided.
Recognizing Interest Earned
- In an adjusting journal entry, the pair of accounts involved in recognizing interest earned but not yet received is Interest Revenue and Interest Receivable.
Characteristics of Deferred Revenue
- Deferred revenue is a liability that represents payment received from customers in advance of delivering goods or services.
- Deferred revenue is gradually reduced as the services are provided, and it is recognized as revenue on the income statement.
Test your knowledge on accounting adjusting entries and deferred revenue with this quiz. Identify which adjusting journal entries are not created as a result of an accrual and understand the effects of recording deferred revenue when cash is received from a customer.
Make Your Own Quizzes and Flashcards
Convert your notes into interactive study material.
Get started for free
