An adjusting entry that increases a revenue and decreases a liability is known as a(n):
A)Accrued expense.
B)Deferred expense.
C)Deferred revenue.
D)Accrued revenue.
E)Depreciation.

Question

Quizplus · Accepted Answer

Deferred revenue is initially recorded as a liability when received, because the service or product has not yet been delivered to the customer. When the service or product is delivered, an adjusting entry is made to decrease the liability account (deferred revenue) and increase a revenue account, recognizing the revenue earned.

An Adjusting Entry That Increases a Revenue and Decreases a Liability