Which of the following is an example of revenue that may be realized but not yet earned?
A)A customer paying in advance for services to be performed in the future.
B)A credit sale made to a customer who has a strong credit history.The goods have been delivered.
C)A credit sale made to a customer with a weak credit history such that the collection of the outstanding receivable is questionable.The goods have been delivered.
D)The cash sale of a fixed asset,as opposed to the sale of inventory.The fixed asset has been delivered.
E)It is impossible to have revenue that is realized but not earned.

Question

Quizplus · Accepted Answer

Revenue that is realized but not yet earned occurs when a customer pays in advance for services to be performed in the future. This payment creates a liability (unearned revenue) as the services are not yet provided. The revenue is earned when the services are performed. Option B is incorrect because the sale has already been completed and the revenue can be recognized immediately. Option C is incorrect because the collection of the receivable is questionable, which means that revenue cannot be recognized until it is collected. Option D is incorrect because the cash sale of a fixed asset is recognized immediately as revenue. Option E is incorrect because revenue can be realized without being earned in certain circumstances.

Which of the Following Is an Example of Revenue That