What is the correct journal entry after a service has been provided to a customer who had previously made a pre-paid payment?

When a service has been provided to a customer who had made a pre-paid payment, the correct journal entry reflects the recognition of the revenue that has now been earned. The initial receipt of payment before the service was rendered would have been recorded as unearned revenue, which is a liability, indicating that the company owes a service to the customer.

By debiting unearned revenue, the company is reducing its liability because it has now fulfilled its obligation to provide the service. Crediting revenue recognizes that the service has been delivered and the company has earned that revenue, transitioning it from a liability to income on the income statement.

This journal entry accurately captures the financial reality of the transaction, ensuring that the financial statements reflect the company’s performance correctly by acknowledging the earning of revenue.