If an adjustment is needed for unearned revenues the
A) liability and related revenue are overstated before adjustment.
B) liability and related revenue are understated before adjustment.
C) liability is overstated and the related revenue is understated before adjustment.
D) liability is understated and the related revenue is overstated before adjustment.

Question

Quizplus · Accepted Answer

Unearned revenue is initially recorded as a liability because it represents an obligation to provide goods or services in the future. Before adjustment, the liability is overstated because the service or product has been partially delivered, and the related revenue is understated because it has not yet been recognized in the income statement.

If an Adjustment Is Needed for Unearned Revenues the