What would the Journal Entry be for this transaction:
Notified by Alex's Engineering Co that Success's bid of $9,000 on a proposed project has been accepted. Alex's paid a $2,500 cash advance to Sucess Systems.
Would I have two different journal entries for this? The one being:
Cash 2500
Unearned Revenue 2500
But what about the $9000 one that I have yet to earn but will end up getting in the next year
The first one looks correct.
You don't need to make any other journal entries until work is completed and payment due, or unless a payment is received in advance.
Journal Entry:
Debit: Cash $2,500
Credit: Unearned Revenue $2,500
Once the work is completed and the payment is due, you will make the following journal entry:
Debit: Unearned Revenue $9,000
Credit: Revenue $9,000
This will recognize the revenue and match it with the expenses incurred in completing the project.
That's correct. The first journal entry would be:
Cash 2,500
Unearned Revenue 2,500
This entry records the receipt of the $2,500 cash advance from Alex's Engineering Co. and creates a liability account called Unearned Revenue to reflect the amount that has been received but not yet earned.
You would not need to make a journal entry for the $9,000 at this time. Once the project is completed and payment is due, you would then recognize the revenue and make the following entry:
Unearned Revenue 9,000
Revenue 9,000
This entry recognizes the revenue of $9,000 earned from the completion of the project and reduces the liability in the Unearned Revenue account.
To record the transaction mentioned, you would indeed have one journal entry. Here's how you can record it:
Debit:
Cash - $2,500
Credit:
Unearned Revenue - $2,500
This journal entry reflects the receipt of the $2,500 cash advance from Alex's Engineering Co. It increases the cash balance while also creating a liability (unearned revenue) since the actual project work has not been performed yet.
Regarding the $9,000 that you will earn in the future, you will not record it in the journal until the project is completed or when payment is due. Once you have completed the project or met the conditions for revenue recognition, you can record the earned revenue and remove the unearned revenue by making the following journal entry:
Debit:
Unearned Revenue - $9,000
Credit:
Revenue - $9,000
This journal entry recognizes the earned revenue of $9,000, reducing the liability of unearned revenue and increasing the revenue account.
Remember, it is crucial to consult with an accounting professional or refer to the specific accounting standards applicable to your situation to ensure accurate and compliant financial reporting.