6. June 8, 2017 - NoDirt entered into a one year contract to provide cleaning
services to a customer. NoDirt will start providing the services on July 1,
2017. The customer paid NoDirt $4,500 cash when the contract was signed on
June 8, 2017. The $4,500 is payment for the first three months of cleaning
service.

The journal entries are provided in explanation.

Explanation:

Overview:

Deferred revenues reflect situations in which money has been received, but goods and services haven't been provided. Also known as deposits, and they are not recognized as revenues in the income statement. Are not "real revenues." They don't affect net income or loss at all. They report on the balance sheet as liabilities. The journal entry to recognize a deferred revenue is to debit or increase cash and credit or increase a deposit or another liability account. When services or goods are provided, the entry is to debit or decrease the deposit account and credit or increase the revenue account – the "real" one, which reports in the income statement and impacts net income or loss.

Payment for 3 months received in advance on June 8, 2017 = $4,500

Payment per month = $1,500

Payment for one year = $1,500 × 12 = $18,000 for one year.

Journal entry to create deferred revenue is as follows:

On June 8, 2017:

Debit: Cash account $4,500

Credit: Deferred income $4,500

On July 1, 2017

Debit: Deferred income $1,500

Credit: Cleaning service income $1,500

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