a-customer-pays-5000-in-advance-for-a-service-to-be-provided-over-the-next-year-

Question

A customer pays $5,000 in advance for a service to be provided over the next year. How should this transaction be recorded initially?

Accepted Answer

Record $5,000 as unearned revenue, a liability.

Answer

Record $5,000 as a deferred expense, a liability.

Answer

Record $5,000 as a prepaid expense, an asset.

Answer

Record $5,000 as earned revenue, an asset.

A customer pays \$5,000 in advance for a service to be provided over the next year. How should this transaction be recorded initially?