Which of the following correctly describes the effects of initially recording deferred revenue when cash is received from a customer?
A)Revenue is increased.
B)Liabilities are not affected.
C)Retained earnings increases.
D)Net income is not affected.

Question

Quizplus · Accepted Answer

When cash is received and revenue is deferred, it is recorded as a liability (deferred revenue) on the balance sheet, and not recognized in the income statement until the revenue is earned. Therefore, net income is not affected initially.

Which of the Following Correctly Describes the Effects of Initially