Question

Assume today is December 31. On April 1, your company began providing service on a twelve month contract to a customer who agreed to pay part of the contract price immediately and the remainder of the contract at the end of the twelve months. The customer paid $6,000 cash to your company on April 1 and will pay $6,000 at the end of the contract on March 31 of next year. The service you are providing is steady throughout the twelve months - in other words, you do the same thing each month for twelve months. The customer could terminate the contract at any time, but had not done that by the end of the year.

On April 1, your company recorded this transaction by debiting Cash and crediting Deferred Revenue for $6,000. No journal entries have been made for this transaction since then. Fix the accounting records as of December 31 by choosing the correct adjusting entry needed at December 31.

Answer 1

Financial Year from January to December (Assuming December is Financial Year End)
			(in $)
Date	Particulars	Debit	Credit
Apr-01	Cash	6,000
	Deferred Revenue		6,000
Dec-01	Deferred Revenue	6,000
	Accounts Receviable	3,000
	Revenue		9,000
Working Notes :
Total Value of Contract April to March	12,000
Number of Months	12
Revenue Per Month	1,000	(Service are provided steady throughout the twelve months	)
Revenue to be recorded from April to December (1000*9 months)	9,000
Advance received as Deferred Revenue	6,000
Receviable (Revenue to be recorded- Advance Received)	3,000