Question

A lawyer collected $720 of legal fees in advance. He erroneously debited Cash for $270 and credited Service Revenue for $270. The correcting entry is A. Cash 450 Service Revenue 270 Unearned Service Revenue 720 B. Cash 720 Service Revenue 720 C. Cash 450 Accounts Receivable 270 Unearned Service Revenue 720 D. Cash 450 Accounts Receivable 450

Answer 1

Option C is correct.

The correcting entry is Cash 450 Accounts Receivable 270 Unearned Service Revenue 720

Step-by-step explanation:

1. Cash received is $ 720 and the amount booked is $ 270,

Hence, Cash Balance of $ 720 - $ 270 which is $ 450 is recorded.

2. Accounts Receivable Account was wrongly credited and hence is debited to reverse the effect.

3. Unearned Service revenue account was not recorded and hence is now recorded.