Adjusting entry. Help!!

[sugarplum]

Of the service revenue
recorded,470 was not earned for the current year.
The original entry would be: Cash Dr
Service Revenue Cr Is that right?

The adjusting entry is
service revenue dr. And cr unearned revenue. The adj entry was done to
lower service revenue wrongly credited. Are the entries correct? If it
is, why was cash not reduced? My instructor thinks this entry is right
but I am confused. Please help.

 

[kirby]

Are the entries correct - Yes
Why was cash not reduced? Because the amount of cash received is a done deal. Let's say you received $10,000 in cash for a job and you immediately record it all to revenue.
Dr Cash $10,000
CR Revenue $10,000

But by the end of the year you had earned only $9,000 of that. So you need to defer the $1,000 that is unearned

DR Revenue $1,000
CR Unearned Revenue ( A liability account) $1,000

So notice - you do not reduce cash at all. Why - because it is a fact that you received $10,000 in cash. Period. It just happens that you did not earn $1,000 of it.