If an entity receives a deposit in advance of goods or services being supplied, the deposit is initially classified as:
A) an asset.
B) revenue.
C) a liability.
D) an expense.

Question

Quizplus · Accepted Answer

The deposit is a liability because the business owes the customer the goods or services that were paid for with the deposit. The deposit will be recognized as revenue when the goods or services are delivered or provided.

If an Entity Receives a Deposit in Advance of Goods