When cash is received from customers in the form of a refundable deposit, the cash account is increased with a corresponding increase in:
A) A current liability.
B) Revenue.
C) Shareholders' equity.
D) Paid-in capital.

Question

Quizplus · Accepted Answer

When cash is received from customers in the form of a refundable deposit, it is recorded as a liability because the customer has paid in advance for a service or product, but the company still owes them the deposit until they fulfill their part of the agreement. Therefore, the increase in cash is accompanied by an increase in a current liability account.

When Cash Is Received from Customers in the Form of a Refundable