When a company receives cash for tuition fees in advance from students, which journal entry should be recorded?

• A. Debit Unearned Revenue (Tuition); Credit Cash
• B. Debit Cash; Credit Unearned Revenue (Tuition)
• C. Debit Accounts Receivable; Credit Tuition Revenue
• D. Debit Tuition Revenue; Credit Cash

Answer: (B)

Verified step by step guidance

1. Understand the nature of the transaction: When a company receives cash for tuition fees in advance, it has not yet earned the revenue. This creates a liability called 'Unearned Revenue' because the company owes the service (tuition) to the students in the future.
2. Identify the accounts involved: The two accounts affected are 'Cash' (an asset account) and 'Unearned Revenue' (a liability account). Cash increases because the company receives money, and Unearned Revenue increases because the company has an obligation to provide tuition services later.
3. Determine the journal entry: In accounting, increases in assets (Cash) are recorded as debits, and increases in liabilities (Unearned Revenue) are recorded as credits. Therefore, the journal entry should be: Debit Cash; Credit Unearned Revenue.
4. Compare the options provided: The correct journal entry matches the option 'Debit Cash; Credit Unearned Revenue (Tuition)'. The other options are incorrect because they either misclassify the accounts or do not reflect the nature of the transaction.
5. Reinforce the concept: Unearned Revenue is a liability account, not a revenue account, because the company has not yet earned the tuition fees. Revenue is recognized only when the service is provided, not when cash is received in advance.