At times,businesses require advance payments from customers that will be applied to the purchase price when goods are delivered or services provided.These customer advances represent:
A)Liabilities until the product or service is provided.
B)A component of stockholders' equity.
C)Long-term assets until the product or service is provided.

Question

Quizplus · Accepted Answer

Customer advances represent a liability until the product or service is provided. This is because the business has received cash in advance of delivery of goods or services and therefore, the business owes the customer the delivery of those goods or services. Once the goods or services have been provided, the liability is eliminated, and revenue is recognized.

At Times,businesses Require Advance Payments from Customers That Will Be