If a seller receives cash before the appropriate time to recognize revenue,it should treat the consideration as a liability.

Question

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The seller should treat the cash received as a liability until the appropriate time to recognize revenue. This is because revenue should only be recognized when the goods or services have been delivered or performed, and the risk and rewards of ownership have transferred to the buyer. Until that point, the seller has an obligation to fulfill their end of the agreement, and the cash received is considered a liability.

If a Seller Receives Cash Before the Appropriate Time to Recognize