It Is Acceptable to Record Cash Received in Advance of Providing

question 201

True/False

It is acceptable to record cash received in advance of providing products or services to revenue accounts if an adjusting entry is made at the end of the period to bring the liability account balance to the correct unearned amount.

---

Definitions:

Differential Cost

The difference in cost between two alternative decisions or changes in output levels.

Direct Cost

Expenses that can be directly traced to producing specific goods or services, such as raw materials and direct labor.

Indirect Cost

Costs not directly traceable to a specific product or project, such as utilities or rent.

Contribution Margin

The difference between sales revenue and variable costs, indicating how much contributes to covering fixed costs and generating profits.