PRC-1 · Chapter 10 · Question 12 of 100
A business received an advance of Rs. 1.8 million against a total annual maintenance contract of Rs. 3.6 million. The contract runs for 9 months. After 4 months, what is the amount of unearned income (pre-received income)?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: B) Rs. 0.2 million
Explanation
Total contract is 3.6m for 9 months (0.4m per month). Revenue earned in 4 months = 0.4m x 4 = 1.6m. Advance received = 1.8m. Unearned income = Advance received (1.8m) - Revenue earned (1.6m) = Rs. 0.2 million.
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