Amounts received in advance from customers for future products or services:
A) Are liabilities.
B) Are revenues.
C) Require an outlay of cash in the future.
D) Are not allowed under GAAP.
E) Increase income.

Question

Quizplus · Accepted Answer

Amounts received in advance from customers for future products or services represent a liability because the seller has not yet delivered the goods or services for which the customer has paid. The seller has an obligation to provide the goods or services at a future date, so the amount received must be recorded as a liability until the obligation is satisfied.

Amounts Received in Advance from Customers for Future Products or Services