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If a company records cash received for services to be provided in the future with a debit to Cash and a credit to Service Revenue, how will this error affect net income for the current period? Multiple Choice Net income will be too low. Net income will be correct. Net income will be too high. Not possible to determine.

Respuesta :

Answer:

Net income will be too high

Explanation:

Since the advance cash is received for providing the services in the future so for recording this the journal entry is

Cash Dr XXXXX

    To Unearned revenue XXXXX

(Being advance cash is received for providing the service in future)

Now if the company records the revenue without considering the unearned revenue which results the overstated in the revenue due to which the income is also raised.

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