Question

On September 30, Jordan Consulting received $12,000 from Hank’s Hardware in exchange for services performed. Upon receipt of this payment, Jordan recorded a $12,000 reduction in unearned service revenue and a $12,000 increase in cash. Did Jordan make the proper accounting entries? Why or why not?

Answer 1

The only way the revenue can be counted as earned is when the services are completed. So if the contract was completed then this would be correct, the unearned service will then be completed and the increase of the 12,000 in cash will be accrued