When a new utility customer submits a deposit, the enterprise fund journal entry will include which of the following?

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Multiple Choice

When a new utility customer submits a deposit, the enterprise fund journal entry will include which of the following?

Explanation:
Deposits from customers create a liability for the enterprise fund. When the deposit is received, cash increases (debit) and the obligation to refund or apply the deposit increases as a liability (credit). Revenue is not recognized at this point because the customer’s payment is a refundable deposit, not income from providing a service yet. Therefore the entry includes a credit to the liability account for Customer Deposits. The full entry would be Debit Cash and Credit Customer Deposits.

Deposits from customers create a liability for the enterprise fund. When the deposit is received, cash increases (debit) and the obligation to refund or apply the deposit increases as a liability (credit). Revenue is not recognized at this point because the customer’s payment is a refundable deposit, not income from providing a service yet. Therefore the entry includes a credit to the liability account for Customer Deposits. The full entry would be Debit Cash and Credit Customer Deposits.

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