If unearned revenues are initially recorded in revenue accounts and have not all been earned at the end of the accounting period, then failure to make an adjusting entry will cause
A) liabilities to be overstated.
B) revenues to be understated.
C) revenues to be overstated.
D) accounts receivable to be overstated.

Question

Quizplus · Accepted Answer

Unearned revenues are payments received before services are provided. If they are incorrectly recorded as revenues and not adjusted, it means the company is recognizing income before earning it, leading to an overstatement of revenues.

If Unearned Revenues Are Initially Recorded in Revenue Accounts and Have