When a Company Sells Services for Which Cash Will Not

question 40

True/False

When a company sells services for which cash will not be received until some future date, the company should credit an unearned revenues account for the amount charged to the customer.

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Definitions:

Total Equity

The total net worth of a company, calculated as the difference between total assets and total liabilities.

Profit Margin

A financial metric that measures the amount of net income earned with each dollar of sales by calculating the percentage of profit generated from revenue.

Return On Assets

A ratio that measures a company's net income relative to its total assets. It indicates how efficiently a company is using its assets to generate profits.

Net Income

The company's overall earnings, calculated by taking away all taxes, costs, and expenses from its total revenue.