A Liability Created by the Receipt of Cash from Customers

question 85

Multiple Choice

A liability created by the receipt of cash from customers in payment for products or services that have not yet been delivered to the customers is:

• A) Recorded as a debit to an unearned revenue account.
• B) Recorded as a debit to a prepaid expense account.
• C) Recorded as a credit to an unearned revenue account.
• D) Recorded as a credit to a prepaid expense account.
• E) Not recorded in the accounting records until the earnings process is complete.

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Definitions:

Deflation

An economic condition characterized by a decrease in the general price level of goods and services, often resulting in increased purchasing power of the currency.

Agriculture

The science, art, and practice of cultivating the soil, growing crops, and raising livestock, forming the backbone of the agricultural industry.

Founding Father

A leader or early statesman who contributed to the establishment of a nation, especially in the context of the United States.

Slave

An individual forcibly bound to serve another person, being treated as property and denied personal freedom.