When cash is debited for rents that are collected but are not yet earned, the amount credited should be
A)recorded as revenue when collected
B)presented as a liability until earned
C)recorded as an asset until earned
D)presented as a separate item in stockholders' equity

Question

Quizplus · Accepted Answer

If rents are collected in advance but not yet earned, they should be recorded as a liability because the company has not yet provided the service (rental of property) to the customer. The rent revenue should be recognized as the rent is earned, typically over the period of time for which the rent was collected in advance.

When Cash Is Debited for Rents That Are Collected but Are