If Cash Is Received from Customers in Payment for Products

question 87

Multiple Choice

If cash is received from customers in payment for products or services that have not yet been delivered to the customers,the business would record the cash receipt as:

• A)A debit to an unearned revenue account.
• B)A debit to a prepaid expense account.
• C)A credit to an unearned revenue account.
• D)A credit to a prepaid expense account.
• E)No entry is required at the time of collection.

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Definitions:

Charitable Contribution

Monetary or in-kind donations given to charitable organizations, often eligible for tax deductions.

Sunk Cost

Expenses that were previously incurred and cannot be reclaimed.

Opportunity Cost

The cost of foregoing the next best alternative when making a decision, essentially what is sacrificed when a particular choice is made.

Differential Cost

The variation in overall expenses incurred from choosing one option instead of another.