PRC-1 · Chapter 4 · Question 54 of 100
If a business receives a one-year maintenance contract fee in advance, how is this 'unearned revenue' treated in the financial statements?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: C) As a liability in the statement of financial position.
Explanation
Unearned revenue is treated as a liability in the statement of financial position because it represents an obligation owed to the customer to provide goods or services in the future.
More Accruals and Prepayments MCQs
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