The law firm received $2,000 cash for legal services to be provided in the future. This is recorded as a liability (Revenue Received in Advance) because the firm has an obligation to provide these services in the future.

If the services have been provided at the end of the accounting period and no adjusting entry is made, this means that the firm has not recognized the revenue it has earned from providing these services.

This would cause:

1. Expenses to be overstated: This is not correct. The situation does not involve expenses.

2. Profit to be overstated: This is not correct. If revenue is not recognized, profit would be understated, not overstated.

3. Liabilities to be understated: This is not correct. If the revenue is not recognized, the liability (Revenue Received in Advance) would remain on the books and be overstated, not understated.

4. Revenues to be understated: This is correct. If the revenue from the services provided is not recognized, revenues would be understated.

Therefore, the correct answer is: If no adjusting entry is made, this would cause revenues to be understated.

Question

The law firm received $2,000 cash for legal services to be provided in the future. This is recorded as a liability (Revenue Received in Advance) because the firm has an obligation to provide these services in the future.

If the services have been provided at the end of the accounting period and no adjusting entry is made, this means that the firm has not recognized the revenue it has earned from providing these services.

This would cause:

1. Expenses to be overstated: This is not correct. The situation does not involve expenses.

2. Profit to be overstated: This is not correct. If revenue is not recognized, profit would be understated, not overstated.

3. Liabilities to be understated: This is not correct. If the revenue is not recognized, the liability (Revenue Received in Advance) would remain on the books and be overstated, not understated.

4. Revenues to be understated: This is correct. If the revenue from the services provided is not recognized, revenues would be understated.

Therefore, the correct answer is: If no adjusting entry is made, this would cause revenues to be understated.

Knowee AI · Accepted Answer

The law firm received $2,000 cash for legal services to be provided in the future. This is recorded as a liability (Revenue Received in Advance) because the firm has an obligation to provide these services in the future.

If the services have been provided at the end of the accounting period and no adjusting entry is made, this means that the firm has not recognized the revenue it has earned from providing these services.

This would cause:

1. Expenses to be overstated: This is not correct. The situation does not involve expenses.

2. Profit to be overstated: This is not correct. If revenue is not recognized, profit would be understated, not overstated.

3. Liabilities to be understated: This is not correct. If the revenue is not recognized, the liability (Revenue Received in Advance) would remain on the books and be overstated, not understated.

4. Revenues to be understated: This is correct. If the revenue from the services provided is not recognized, revenues would be understated.

Therefore, the correct answer is: If no adjusting entry is made, this would cause revenues to be understated.

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