Homework Answers
| Solution: | |||
| Answer is 1st option "Liability; Deferred Revenue " | |||
| Working Notes: | |||
| When cash is received in advance of a performance obligation being satisfied, a(n) Liability called Deferred Revenue is recorded | |||
| Cash received in advance of a performance obligation being satisfied means before services have been given or performed but cash have been already received, so it becomes obligation of company to give back cash or perform the service to the customer and this cash received cannot be booked as revenue until it is performed so it will be deferred as revenue to next period in which it will performed so recorded as Deferred revenue. | |||
| so it is liability and recorded as Deferred Revenue. | |||
| Hence | All other options could not be right . Only 1st option is correct option. | ||
| Please feel free to ask if anything about above solution in comment section of the question. |
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