A deposit received by an entity in advance of goods or services being supplied is initially classified as:
A) an asset.
B) a liability.
C) income.
D) an expense.

Question

Quizplus · Accepted Answer

A deposit received in advance of goods or services being supplied is considered a liability because the entity has not yet fulfilled its obligation to provide the goods or services. Once the goods or services are provided, the liability is converted into revenue.

A Deposit Received by an Entity in Advance of Goods