If a company fails to adjust a deferred revenue recorded as a liability, revenues will be overstated on the income statement.

Name: If a company fails to adjust a deferred revenue recorded as a liability, revenues will be overstated on the income statement.
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Question

Quizplus · Accepted Answer

Deferred revenue is a liability because it represents revenue that has been collected but not yet earned. If not adjusted, it remains a liability and does not affect the income statement, so revenues would not be overstated.

If a Company Fails to Adjust a Deferred Revenue Recorded