What is the correct journal entry to record cash received in advance for work not yet performed?

The correct journal entry to record cash received in advance for work not yet performed is to debit Cash and credit Unearned Revenue. This is done because when a company receives cash before delivering goods or services, it creates a liability. The company has an obligation to provide those services in the future, which is represented by the Unearned Revenue account.

When cash is received in advance, the Cash account increases, reflecting the cash inflow. Simultaneously, the Unearned Revenue account is credited to indicate that the company owes this service to the customer, thus recognizing the future obligation. As the service is performed, the Unearned Revenue balance would be decreased, and the Revenue account would be increased, aligning with the revenue recognition principle.

This approach complies with the accrual basis of accounting, which states that revenue should be recognized when earned, not when cash is received. In this case, the work has not yet been performed, so the revenue is not recognized yet, and instead, it is recorded as a liability until the obligation is fulfilled.