On Mar 3, L. Lyons Company Received $100 Cash In Advance Of Providing Catering Services To A Customer. Use Your Knowledge Of What A Correct Journal Entry Should Look Like To Identify What Would Be Included In The Correct Journal Entry. (Check all that apply.)

On Mar 3, L. Lyons Company Received $100 Cash In Advance Of Providing Catering Services To A Customer. Use Your Knowledge Of What A Correct Journal Entry Should Look Like To Identify What Would Be Included In The Correct Journal Entry. (Check all that apply.) A. Cash would be credited and listed second B. Accounts Receivable would be debited and listed first C. Unearned Revenue would be debited and listed first D. Cash would be debited and listed first E. Unearned Revenue would be credited and listed second
The correct options of this multiple choice question (mcq) are D and E, as when the L. Lyons company received cash of $100 from a customer in advance for providing catering services in future, then according to Accrual Basis of Accounting, we record the entry by debited cash account of $100 as a current asset and credit Unearned Revenue Account of $100 as a current liability account as the catering services yet to be performed for the customer. Here cash is increasing as the business received the payment from the customer, so we debit it. As the business is not provided the customer, so it becomes the current liability (unearned revenue) of the business to perform catering services against the advance payment received. As the unearned revenue is a liability and it is increasing, so we credit it according to the Rules of Debit and Credit. Cash is shown on balance sheet on assets side under current assets section while unearned revenue is shown on liabilities & equity side under current liabilities section.

The effect of this Business Transaction on Accounting Equation is that, assets side / left side is increased by $100 due to increase in cash and liabilities & equity side / right side is also increased by $100 due to increase in unearned revenue, so the accounting equation remains in balance as shown below:

Assets      =             Liabilities            +   Equity

                                                              +Cash       =      +Unearned Revenue

                                                              +$100       =                +$100

The option A is incorrect as cash is not credited and listed second. It is debited and listed first.

The option B is also wrong choice as in this journal entry, there is no involvement of accounts receivable, so this account is neither debited nor listed first in the journal entry.

The option C is also incorrect as unearned is credited and listed second and not debited and listed first.

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