If Unearned Revenues Are Initially Recorded in Revenue Accounts and Not

question 37

Multiple Choice

If unearned revenues are initially recorded in revenue accounts and not all the related services been performed at the end of the accounting period then failure to make an adjusting entry will cause

• A) liabilities to be overstated.
• B) revenues to be understated.
• C) revenues to be overstated.
• D) accounts receivable to be overstated.

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Definitions:

Outstanding Shares

The total number of shares of a corporation's stock that are currently owned by all its shareholders, including share blocks held by institutional investors and restricted shares.

Equity Method

An accounting technique used to record investments in other companies when significant influence is held but not complete control.

Revenue from Stock Investments

Income earned from the ownership of shares in other companies, including dividends received and gains from sales of these shares.

Investee

A company or entity in which an investor holds a minority stake, not sufficient to exercise control over it.