Companies that are paid in advance for services or products record a liability on the receipt of cash referred to as unearned revenue or deferred credits.

Question

Quizplus · Accepted Answer

This statement is true. Companies record unearned revenue or deferred credits when they receive cash in advance for services or products. This is because they have not yet earned the revenue and therefore cannot recognize it as revenue on their financial statements until the service or product is provided.

Companies That Are Paid in Advance for Services or Products