A law firm received $2,000 cash for legal services to be rendered in the future.

Question

A law firm received $2,000 cash for legal services to be rendered in the future. The full amount was credited to the liability account Unearned Service Revenue. If the legal services have been rendered at the end of the accounting period and no adjusting entry is made, this would cause:

Answer

expenses to be overstated.

net income to be overstated.

liabilities to be understated.

revenues to be understated.

expenses to be overstated.

net income to be overstated.

liabilities to be understated.

revenues to be understated.

Explanation / Answer

d. revenues to be understated.

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