Question

multiple select question
select all that apply
explain what unearned revenues are by selecting the statements below which are correct.
□ they refer to cash received in advance of performing a service or product.
□ they are reported on a balance sheet.
□ they are a liability.
□ they are also called accounts receivable.
□ they refer to earnings which have been earned, but not yet billed.
□ they are also called deferred revenues.

Explanation:

1. Unearned revenues are cash received before providing goods/services, creating an obligation to fulfill the promise.
2. As a liability, unearned revenues are reported on the balance sheet, not the income statement.
3. They represent a present obligation to customers, so they qualify as a current liability.
4. Unearned revenues are often called deferred revenues, as revenue recognition is deferred until the obligation is met.
5. Accounts receivable are earned but unbilled amounts, which is the opposite of unearned revenue, so that statement is incorrect.
6. Earned but unbilled amounts are accrued revenues, not unearned revenues, so that statement is incorrect.

Answer:

• They refer to cash received in advance of performing a service or product.
• They are reported on a balance sheet.
• They are a liability.
• They are also called deferred revenues.