A company that receives money in advance of performing a service
A)debits Cash and credits a Prepaid account.
B)debits Deferred Revenue and credits Accounts Payable.
C)debits Cash and credits Deferred Revenue.
D)debits Cash and credits Accounts Receivable.

Question

Quizplus · Accepted Answer

When a company receives money in advance of performing a service, it records the transaction by debiting Cash (to increase the cash balance) and crediting Deferred Revenue (to recognize the obligation to perform services in the future). This reflects the receipt of cash before the service is provided.

A Company That Receives Money in Advance of Performing a Service