PRC-1 · Chapter 4 · Question 52 of 100
Mr. Aslam paid Rs. 50,000 in advance to Mr. Atif for cleaning services that will be provided next year. How is this advance payment classified in the books of Mr. Atif?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: C) Unearned income
Explanation
From the perspective of the recipient (Mr. Atif), receiving money for services not yet performed creates a liability to provide those services in the future, which is classified as unearned income.
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