You are controller for an architectural firm whose accounting year ends on December 31. As part of the management team, you receive a year-end bonus directly related to the firm’s earnings for the...

You are controller for an architectural firm whose accounting year ends on December 31. As part of the management team, you receive a year-end bonus directly related to the firm’s earnings for the year. One of your duties is to review the journal entries recorded by the bookkeepers. A new bookkeeper prepared the following journal entry:

You notice that the explanation for the journal entry refers to the amount as a deposit, and the bookkeeper explains to you that the firm plans to provide the services to the client in March of the following year.

Required

1. Did the bookkeeper prepare the correct journal entry to account for the client’s deposit? Explain your answer.

2. What would you do as controller for the firm? Do you have a responsibility to do anything to correct the books? Explain your answer.