Ted Catering received $1,160 cash in advance from a customer for catering services to be provided in three months. Determine the general journal entry that Ted Catering will make to record the cash receipt. Assume the company's policy is to initially record prepaid and unearned items in balance sheet accounts.

Debit Cash account $1,160

Credit Unearned revenue $1,160

Being entries to recognize amount collected in advance for catering services.

Explanation:

When cash is received in advance for a service to be rendered later, the transaction creates both an asset and a liability in the books of the party that received the cash as the obligation to perform the service still exist.

The entries required are debit to cash and a credit to unearned or deferred revenue.

Hence for Ted Catering, the required entries are;

Debit Cash account $1,160

Credit Unearned revenue $1,160