If a company records cash received for services to be provided in the future with a debit to Cash and a credit to Service Revenue,how will this error affect net income for the current period?
A)Net income will be too low.
B)Net income will be correct.
C)Net income will be too high.

Question

Quizplus · Accepted Answer

Recording cash received for services to be provided in the future as Service Revenue will overstate the revenue for the current period, leading to a higher net income. This is because the revenue has not yet been earned and should not be recognized until the services are actually provided. Therefore, the best choice is C - net income will be too high.

If a Company Records Cash Received for Services to Be