The Liability Created When a Business Collects Cash from Customers

question 107

Multiple Choice

The liability created when a business collects cash from customers in advance of completing a service or delivering a product is called:

• A)accrued revenue.
• B)accrued expense.
• C)deferred revenue.
• D)prepaid expense.

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Definitions:

Selling and Administrative Expense

Costs related to the selling of products and the administration of a business.

Budgeted Unit Sales

The projected amount of sales in units that a company plans to achieve in a specific period.

Cash Disbursements

Payments made in cash by a business for various purposes, including operating expenses, asset purchases, and debt repayments.

Variable Overhead Rate

The rate at which variable overhead costs are applied to units of production, based on an activity metric such as labor hours.