When a product or service is delivered for which a customer advance has been previously received, the appropriate journal entry includes:
A) A debit to a revenue and a credit to a liability account.
B) A debit to a revenue and a credit to an asset account.
C) A debit to an asset and a credit to a revenue account.
D) A debit to a liability and a credit to a revenue account.

Question

Quizplus · Accepted Answer

When a customer advance is received, it is initially recorded as a liability because the company owes either the product, the service, or a refund to the customer. Once the product or service is delivered, the liability is decreased (debited) and revenue is recognized (credited), reflecting the fulfillment of the obligation.

When a Product or Service Is Delivered for Which a Customer