PRC-1 · Chapter 4 · Question 10 of 100
A transaction recorded as 'unearned revenue' in the books of the recipient entity will conversely be recorded as what in the books of the paying entity?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: C) A prepaid expense
Explanation
If a receiver gets cash in advance, it is unearned revenue (liability) for them. For the payer giving the cash in advance, it is a prepaid expense (asset) until the service is received.
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