A company receives $10,000 in cash for services yet to be performed. Using the accrual method, what's the correct entry to record the transaction?

Step 1: Define the Problem

Identify the accounting entry required for cash received for services not yet performed using the accrual method.

Step 2: Break Down the Problem

1. Determine the nature of the transaction: Cash received in advance for services.
2. Identify the accounts affected: Cash and Unearned Revenue.

Step 3: Apply Relevant Concepts

• Accrual Accounting Principle: Revenue is recognized when earned, not when cash is received.
• Unearned Revenue: A liability account used to record cash received for services not yet performed.

Step 4: Analysis, Verify and Summarize

• Cash Account: Increase (Debit) because the company receives cash.
• Unearned Revenue Account: Increase (Credit) because the company has an obligation to perform services in the future.

Final Answer

The correct journal entry to record the transaction is:

• Debit: Cash $10,000
• Credit: Unearned Revenue $10,000

This entry reflects the increase in cash and the liability for services to be performed.