Question

2. Listed below are three reasons why a transaction would not yield a revenue. Match each of the reasons to the transaction it properly describes. Transaction ces Reason This transaction changed the form of an asset from a receivable to cash. Total assets were not increased (revenue was recognized when the services were originally provided) This transaction brought in cash (increased assets), but it also increased a liability by the same amount (no goods or services were provided to generate revenue). This transaction brought in cash, but this is an owner investment. This transaction brought in cash, but it created a liability because the services have not yet been provided to the client.

Answer 1

Please give positive ratings so I can keep answering. It would help me a lot. Please comment if you have any query. Thanks!

You have not provided the options so I am giving my own answers.

a.

It means that the company received cash from his customer. It will not increase the revenue because accrual method is followed which means service is provided o credit and accounts receivable was debited. Now, as customer has paid his dues so cash will increase and accounts receivable will decrease.

b.

It means that the company received cash against loan taken. It will not increase the revenue neither goods are sold or service is provided here.

c.

It means that the company received cash against capital contributed by owner. It will not increase the revenue neither goods are sold or service is provided here.

d.

It means that the company received cash against goods to be sold or service to be provided in future. It will not increase because under accrual method revenue is recorded when goods are sold or service is provided and when cash received from the customer. It will increase unearned revenue.