Which is the term for revenue collected and recorded in advance? a Accrued b Unearned c...

Which is the term for revenue collected and recorded in advance?

a	Accrued
b	Unearned
c	Prepaid
d	Cash

Solutions

Expert Solution

The correct answer is Option 'B' The revenue that has been collected but is not yet earned and hence recorded as an Advance is called "Unearned" Revenue.

For example, Mr X paid ABC Inc $ 180,000 on 1 Jan 2018 for goods to be delivered on 15 Feb 2018.

This means that on 1 Jan 2018 when ABC Inc will receive this payment, the entry that would be recorded will be:

Accounts title	Debit	Credit
Cash	$ 180,000.00
Unearned Revenue - Sales		$ 180,000.00

This "unearned" revenue was recieved in advance and WILL ONLY BE recognised as a 'REVENUE' when it is 'actually earned'. It will be actually earned when goods are delivered on 15 Feb 2018. On 15th Feb, the entry eould become:

Accounts title	Debit	Credit
Unearned Revenue - Sales	$ 180,000.00
Sales Revenue -earned		$ 180,000.00

ekkarill92 answered 1 year ago

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