When a contract fails to meet the collectibility criteria the seller should record any advance payment as a/an ________.
A)asset
B)revenue
C)liability
D)expense

Question

Quizplus · Accepted Answer

When a contract fails to meet the collectibility criteria, any advance payment received by the seller should be recorded as a liability, as it represents an obligation to return the payment if the seller cannot perform as promised. Recording the advance payment as an asset or revenue would overstate the seller's financial position, while recording it as an expense would be incorrect as the seller has not incurred any cost related to the contract performance yet.

When a Contract Fails to Meet the Collectibility Criteria the Seller