Quick Excel worksheet question

[hazza]

Hi there,

So I have the following scenario in a question: 'John has recently gone into running a small guest-house providing bed and breakfast'. I need to complete a worksheet for given transactions.

I'm stuck on this one: 'Opened the guest-house for business and was able to let all eight rooms for the week at £30 per night per room. All the guests paid in advance'.

Now I'm not to sure where this should go, I think it would be unearned revenue as the money hasn't actually been collected yet, and some guests may turn up, but I'm not sure what the other side would be...

any ideas would be great. Thanks for reading!

 

[Nora]

It's unearned revenue yes but not because it hasn't been collected. it has been collected (you said guests paid in advance). It's unearned because services haven't been rendered yet. So this amount is actually a liability, something that you have to repay if services aren't rendered.

Since the guests paid in advance, that means cash was received. So the other side of the entry is Cash.

Cash debited, unearned revenue credited.