PRC-1 · Chapter 4 · Question 1 of 100
'Apex Consultancies' receives cash in advance from a client for services that will be provided in the following financial year. How is this unearned revenue treated in the financial statements?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: B) Liability in the statement of financial position
Explanation
Unearned revenue represents an obligation to provide goods or services in the future. Therefore, it is treated as a liability in the statement of financial position until the revenue is actually earned.
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