If cash is received from customers in payment for products or services that have not yet been delivered to the customers,the business would record the cash receipt as:
A)A debit to an unearned revenue account.
B)A debit to a prepaid expense account.
C)A credit to an unearned revenue account.
D)A credit to a prepaid expense account.
E)No entry is required at the time of collection.

Question

Quizplus · Accepted Answer

When cash is received from customers for products or services that have not yet been delivered, the business has an obligation to provide those products or services at a future date. Therefore, the cash received is recorded as a liability called unearned revenue. The credit to unearned revenue reflects the liability created by the receipt of the cash, indicating that the business owes the customers goods or services in the future.

If Cash Is Received from Customers in Payment for Products