A company makes a deferral adjustment that increased a revenue account.This must mean that a(n):
A)expense account was decreased by the same amount.
B)expense account was increased by the same amount.
C)liability account was decreased by the same amount.
D)asset account was decreased by the same amount.

Question

Quizplus · Accepted Answer

Previously deferred amounts exist on the balance sheet because the company paid cash before incurring the expense or received cash before earning revenue.When a company receives cash from customers before delivering the goods or services,this revenue is initially deferred as a liability on the balance sheet (in an account called Deferred Revenue).Later,when the company delivers the goods or services,thereby meeting its obligation and earning the revenue,a deferral adjustment is made to decrease the liability and increase the related revenue account.

A Company Makes a Deferral Adjustment That Increased a Revenue