Question

Tiny Corporation shows a balance in the unearned revenue account of $1,200 at the end of the month. It is determined that $500 of that amount remains unearned at this time. The adjusting entry to update the accounts is:___________.

Answer 1

Answer: The adjusting entry is to DR Unearned Revenue Account with $700 and CR Earned Revenue Account with $700.

Explanation:

A reduction in the unearned revenue account implies that a portion of the unearned revenue has been earned.

Unearned revenue account is a liability account that warehouses revenue paid for but yet to be earned. A reduction in the liability means an income has been earned and recognised.