What is an example of a deferred revenue adjustment?

The correct answer involves recognizing the accounting process for deferred revenue, which is a liability representing cash received before services are rendered or goods are delivered. In this case, when the service is eventually provided, the company must adjust its accounts by crediting service revenue (to recognize the revenue earned) and debiting unearned revenue (to reduce the liability).

This adjustment reflects the transaction where the company has fulfilled its obligation to provide goods or services for which it was previously paid, thus moving the amount from a liability to actual revenue. This adherence to the revenue recognition principle ensures that revenue is recorded in the period it is earned, aligning with the accrual basis of accounting.

Other options do not represent the appropriate treatment of deferred revenue. For instance, recognizing cash received for future services rendered does not involve adjusting journal entries; it simply states the nature of deferred revenue. Writing off unearned revenue as a loss misrepresents the nature of the obligation, as unearned revenue is not an expense until it is earned. Similarly, debiting accrued revenue incorrectly suggests that revenue has been earned when it has not yet met the criteria for recognition.