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Questions and Answers
Which of the following is an adjusting journal entry resulting from an accrual?
What is the effect of initially recording deferred revenue when cash is received from a customer?
In an adjusting journal entry, which of the following pairs is involved in recognizing interest earned but not yet received?
When cash is received from a customer in advance for services that will be provided later, which of the following accounts is affected?
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Which of the following is true about deferred revenue?
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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.
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Description
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.
