A magazine publisher sells annual subscriptions for magazines.The publisher requires cash payment before the magazines are sent out.When the first monthly issue is sent out,the company will ________.

Question

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When the first monthly issue is sent out, the publisher will recognize revenue for a portion of the annual subscription due to the accrual accounting principle. This will result in an increase in revenues. Since cash was received earlier for the full subscription period, there will be a decrease in liabilities since the obligation to deliver the magazines has been partially fulfilled.

A Magazine Publisher Sells Annual Subscriptions for Magazines