Under the deferral method of accounting for advance receipt of revenues, which of the following statements is/are correct?
I.Receipts of service revenue colleted in advance are included in gross income in the current year to the extent they included in revenue for financial accounting purposes.
II.Receipts of rents and interest collected in advance are included in gross income in the current year to the extent they are included in revenue for financial accounting purposes.

A)Only statement I is correct.
B)Only statement II is correct.
C)Both statements are correct.
D)Neither statement is correct.

Question

Under the deferral method of accounting for advance receipt of revenues, which of the following statements is/are correct?
I.Receipts of service revenue colleted in advance are included in gross income in the current year to the extent they included in revenue for financial accounting purposes.
II.Receipts of rents and interest collected in advance are included in gross income in the current year to the extent they are included in revenue for financial accounting purposes.
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A)Only statement I is correct.
B)Only statement II is correct.
C)Both statements are correct.
D)Neither statement is correct.

Quizplus · Accepted Answer

Under the deferral method, service revenue collected in advance is included in gross income to the extent it is recognized for financial accounting purposes. However, rents and interest collected in advance are generally included in gross income in the year received, not deferred.

Under the Deferral Method of Accounting for Advance Receipt of Revenues