A liability created by the receipt of cash from customers in payment for products or services that have not yet been delivered to the customers is:
A)Recorded as a credit to a prepaid expense account.
B)Recorded as a credit to an unearned revenue account.
C)Recorded as a debit to a prepaid expense account.
D)Recorded as a debit to an unearned revenue account.
E)Not recorded in the accounting records.

Question

Quizplus · Accepted Answer

When cash is received before products or services are delivered, it is recorded as a credit to an unearned revenue account, representing a liability until the obligation is fulfilled.

A Liability Created by the Receipt of Cash from Customers