When a magazine company collects cash for selling a subscription, it is an example of:
A) An accrued liability transaction.
B) An accrued receivable transaction.
C) A prepaid expense transaction.
D) A deferred revenue transaction.

Question

Quizplus · Accepted Answer

This is a deferred revenue transaction because the company has received payment for a service that has not yet been provided, in this case, the magazines that will be sent to the subscriber regularly over a period of time. The revenue will be recognized as the magazines are shipped to the subscriber.

When a Magazine Company Collects Cash for Selling a Subscription