During the year, the publishers of Fishing for the Family, a monthly magazine, received cash for a
Question:
During the year, the publishers of Fishing for the Family, a monthly magazine, received cash for a 3-year magazine subscription. A credit was made to the Unearned Subscriptions Revenue account.
(a). Is the required adjusting entry made at the end of the period an example of accrual or a deferral?
(b). What types of accounts will be affected by the required adjusting entry?
(c). What effect will omission of the adjusting entry have on profit and on the statement of financial position?
Step by Step Answer:
a Deferral b Unearned Subscriptions Revenue a liability account will be debited and S...View the full answer
Accounting
ISBN: 978-1118608227
9th edition
Authors: Lew Edwards, John Medlin, Keryn Chalmers, Andreas Hellmann, Claire Beattie, Jodie Maxfield, John Hoggett
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Unearned revenue is money received by an individual or company for a service or product that has yet to be provided or delivered. It can be thought of as a \"prepayment\" for goods or services that a person or company is expected to supply to the purchaser at a later date. As a result of this prepayment, the seller has a liability equal to the revenue earned until the good or service is delivered. This liability is noted under current liabilities, as it is expected to be settled within a year.
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