Treating unearned revenue as revenue earned: Select one: a. understates revenue and net income in the...
Treating unearned revenue as revenue earned:
Select one:
a. understates revenue and net income in the current period
b. understates revenue and overstates net income in the current period
c. overstates revenue and understates net income in the current period
d. overstates revenue and net income in the current period
Homework Answers
Correct answer------------d. overstates revenue and net income in the current period.
.
Unearned revenue is the revenue that is received in advances from customer so that is actually not a revenue until obligation on the side of the business is done.
Unearned revenue is considered as liability. If unearned revenue is recorded as revenue earned then revenue will be more than amount it is suppose to be which is as we say overstated.
When revenue is overstated then net income is overstated as well.
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