Amounts received in advance from customers for future products or services:
A) Are revenues.
B) Increase income.
C) Are liabilities.
D) Are not allowed under GAAP.
E) Require an outlay of cash in the future.

Question

Quizplus · Accepted Answer

Amounts received in advance from customers for future products or services are considered a liability because the company has not yet fulfilled its obligation to provide the products or services. Once the goods or services are provided, the liability is then recognized as revenue.

Amounts Received in Advance from Customers for Future Products or Services