When money is received from a customer prior to the delivery of goods or the performance of a service, it is recorded as revenue.

Question

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When money is received from a customer prior to the delivery of goods or the performance of a service, it is recorded as a liability (specifically, unearned revenue or deferred revenue) on the balance sheet, not as revenue. Revenue is recognized when the goods are delivered or the service is performed.

When Money Is Received from a Customer Prior to the Delivery