The adjusting entry required when amounts previously recorded as deferred revenues are earned by providing goods or services to customers includes:
A)A debit to a liability.
B)A debit to an asset.
C)A credit to a liability.

Question

Quizplus · Accepted Answer

When amounts previously recorded as deferred revenues are earned, the company needs to recognize the revenue. This involves debiting (decreasing) a liability account (the deferred revenue) because the obligation to provide goods or services has been fulfilled, and crediting (increasing) a revenue account to recognize the earned revenue.

The Adjusting Entry Required When Amounts Previously Recorded as Deferred