BUSINESS ADMINISTRATION
FINANCIAL ACCOUNTING
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Current Assets
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Current Liability
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Intangible assets
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Long term liability
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Detailed explanation-1: -Under the accrual method of accounting, income that is received in advance is a liability because the company that received the money has not yet earned it and it has an obligation (a liability) to deliver the related goods or services in the future.
Detailed explanation-2: -Incomes received in advance are regarded as a liability.
Detailed explanation-3: -Income received in advance but not earned will appear in the balance sheet as a liability. Q. concept states that income received in advance should be considered as a liability and not as revenue.
Detailed explanation-4: -Unearned incomes. Incomes received in advance are also called as unearned incomes.
Detailed explanation-5: -Examples of income received in advance – Commission received in advance, rent received in advance, etc. Such advances received are treated as a liability for the business.