PRC-1 · Chapter 4 · Question 40 of 100
'Global Gym' receives Rs. 36,000 cash in December for a 12-month membership starting in January of the following year. What is the initial journal entry to record this receipt in December?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: B) Debit Bank Rs. 36,000, Credit Unearned Revenue Rs. 36,000
Explanation
Because the cash is received before any service is provided, it must be recorded as an increase in cash (Debit Bank) and a corresponding liability (Credit Unearned Revenue).
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