A Liability Created When a Business Collects Cash from Customers

question 6

Multiple Choice

A liability created when a business collects cash from customers in advance of providing services or delivering goods is called a(n) ________.

• A)notes receivable
• B)unearned revenue
• C)accrued liability
• D)service revenue

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Definitions:

Depletion Expense

The allocation of the cost of natural resources over their useful life, often used in industries like mining, quarrying, or oil extraction.

Mineral Rights

Legal entitlements that grant the holder the ability to mine, extract, or exploit minerals from the land.

Adjusting Entry

Journal entries made at the end of an accounting period to allocate income and expenditure to the period in which they actually occurred.

Straight-Line Method

A process for figuring out depreciation or amortization by spreading the asset’s price evenly over its operational life.