When a company receives cash before products or services are provided the following results:
A)Assets and stockholders' equity increase.
B)Assets and revenue increase.
C)Liabilities and revenues increase.
D)Liabilities and assets increase.

Question

Quizplus · Accepted Answer

When a company receives cash before products or services are provided, it records the cash as an asset (increasing assets) and a liability (such as unearned revenue) because it owes a service or product in the future, thus increasing liabilities.

When a Company Receives Cash Before Products or Services Are