suppose the membership fee at a club is 400 p.m (all monthly payments being collected in advance) and a customer pays 2400 in advance for a six months package. But he doesnt use the club and 5 months later he is refunded the entire amount of 2400. What should be the accounting entries?
As per me when he pays the 2400 advance it would be
dr cash 2400
cr Unearned revenue 2400 (unearned revenue being a current liability in the balance sheet)
and if he had used the club, then each month-end the entry would be
dr Unearned revenue 400
Cr sale 400
and this entry would continue for 6 months
But i dont understand what entry should be passed in the case of refund, given that the services of the club has not been used by the customer. Pls Help!!!!!!! Thanks!!!!!!!!!!!
CAclubindia
