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

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

• A. Debit to Customer Deposits
• B. Debit to Cash
• C. Credit to Revenue
• D. Credit to Customer Deposits

Answer: (D)

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.