Subtracting a decrease in Unearned Revenue from net income eliminates the effect of recording revenue that:
A) increased net income, but did not impact cash this period.
B) decreased net income, but did not impact cash this period.
C) increased net income and increased cash flow this period.
D) decreased net income and decreased cash flow this perioD.
Subtracting decreases in current liabilities eliminates the effects of transactions that increased net income but did not affect cash. For example, a company decreases Unearned Revenue and increases net income in the current period when it fulfills its prior obligations to provide services, but cash is not affecteD.

Question

Quizplus · Accepted Answer

When unearned revenue decreases, it means revenue is recognized, increasing net income without affecting cash, as cash was received in a prior period.

Subtracting a Decrease in Unearned Revenue from Net Income Eliminates