Are Advanced Receipts from Customers Treated as Revenue at the Time

question 142

Multiple Choice

Are advanced receipts from customers treated as revenue at the time of receipt? Why or why not?

• A) Yes, they are treated as revenue at the time of receipt because the company has access to the cash.
• B) No, the amount of revenue cannot be adequately determined until the company completes the work.
• C) Yes, The intent of the company is to perform the work and the customer is confident that the services will be completed.
• D) No, revenue cannot be recognized until the work is performed.

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Definitions:

Dollar Amounts

Units of currency used in financial transactions or accounting to represent values or costs.

Fair Value

The value that could be gained from the sale of an asset or the expense of transferring a liability, in a regulated transaction among market players on the date of assessment.

Asset Acquired

An item of economic value obtained by a company, expected to provide future benefit by generating cash flows or reducing expenses.

Future Service Potential

The potential of an asset to contribute to future operations and cash flows of an organization.