Sport Pro Magazine sold 12,000 annual subscriptions on August 1, 2017, for $18 each Prepare Sport Pro August 1, 2017 Journal Entry O Cash $216.000 Sales Revenue S216 000 O Sales Revenue S216,000 Cash $216 000 O Cash $216.000 Unearned Subscription Revenue O Unearned Subscription Revenue S216 000 $216.000 Cash S216.000
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At the end of the accounting period, a financial statement is prepared by every company, then at that time while preparing the financial statement, the company determines among its total receivable amount how much portion of receivables is collected by the company during that accounting period.
Accounts Receivable
The word “account receivable” means the payment is yet to be made for the work that is already done. Generally, each and every business sells its goods and services either in cash or in credit. So, when the goods are sold on credit account receivable arise which means the company is going to get the payment from its customer to whom the goods are sold on credit. Usually, the credit period may be for a very short period of time and in some rare cases it takes a year.
Unearned revenue:
The revenue which is received in advance by the company for the services or goods to be delivered in future is referred to as unearned revenue. Since the revenue is received for the services not yet performed, the revenue is recorded as a liability until the services are performed. After the services are performed, the liability would be reduced and the revenue would be credited.
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