If throughout an accounting period the fees for legal services paid in advance by clients are recorded in an account called Unearned Legal Fees,the end-of-period adjusting entry to record the portion of those fees that has been earned is:

A) Debit Cash and credit Legal Fees Earned.
B) Debit Cash and credit Unearned Legal Fees.
C) Debit Unearned Legal Fees and credit Legal Fees Earned.
D) Debit Legal Fees Earned and credit Unearned Legal Fees.
E) Debit Unearned Legal Fees and credit Accounts Receivable.

Question

Hitendra Gosain · Accepted Answer

Final Answer : C, Explanation :  The end-of-period adjusting entry to record the portion of those fees that has been earned is to debit the Unearned Legal Fees account (as this is a liability account which represents the unearned or yet-to-be-earned fees) and credit the Legal Fees Earned account (as this is an income or revenue account which represents the fees that have been earned or recognized during the accounting period). The other options do not correctly record the earned fees and may result in errors in the financial statements.

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