If Cash Is Received from Customers in Payment for Products

question 68

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

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Definitions:

CVP Model Assumptions

Assumptions underlying Cost-Volume-Profit analysis, including constant sales price, variable and fixed costs, and operating efficiency.

Model Usefulness

The effectiveness and practicality of a theoretical model in explaining, predicting, or making decisions in real-world situations.

Operating Leverage Factor

A measure that assesses the degree to which a company can increase operating income by increasing revenue, highlighting the fixed versus variable costs structure.

Sales Revenue

The total amount of money generated from the sale of goods or services before any expenses are subtracted.