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Ted Catering received $1,100 cash in advance from a customer for catering services to be provided in three months. Determine the general journal entry that Ted Catering will make to record the cash receipt. Assume the company’s policy is to initially record prepaid and unearned items in balance sheet accounts.

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Answer:

The journal entry is:

Cash a/c Dr.   1100

To unearned catering revenue  a/c  Cr.   1100

Explanation:

Since the cash has been received. Thus, it is debited. However, cash has been received in advance and still, there is a liability to provide service. So, unearned catering revenue is credited.

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