PRC-1 · Chapter 4 · Question 30 of 100
'Sigma Services' received a 6-month maintenance contract payment in full before any services were rendered. How must this receipt be classified on the Statement of Financial Position until the services are actually performed?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: B) Current Liability
Explanation
Money received in advance for services not yet performed is unearned revenue. Because it will be settled by providing services within the next 6 months, it is classified as a current liability.
More Accruals and Prepayments MCQs
- Q32'Grand Properties' received Rs. 850,000 cash for rent during the year. The opening rent in arrears was Rs. 50,000, and the closing rent in…
- Q33'Pinnacle Manufacturers' paid Rs. 450,000 for electricity during the financial year. At the start of the year, accrued electricity was Rs…
- Q34'Silver Oak Traders' pays an annual fire insurance premium of Rs. 180,000 every year on 1 September. Their financial year ends on 31…
- Q35An accrued consulting income of Rs. 25,000 was mistakenly recorded by 'Nexus Consulting' as unearned income of Rs. 25,000. What is the…
- Q36'Alpha Builders' acquired a bank loan of Rs. 2,000,000 at a 10% annual interest rate. Interest is paid quarterly. The last quarter's…