BUSINESS ADMINISTRATION
FINANCIAL ACCOUNTING
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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An Income
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An Expense
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An Asset
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A liability
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Detailed explanation-1: -When an income is received in advance it is treated as liability. Subscription received but not yet earned is considered as a liability.
Detailed explanation-2: -The subscription in advance is a liability because it is a future earning that will be due in future, it means the company is owing outsiders the said amount tied to the payment.
Detailed explanation-3: -Now, Subscription received in advance means the amount of money that has been received during the current year but which relates to the year that is yet to come. In other words, we can say it is the unearned income by the organization.
Detailed explanation-4: -Subscription received is an income which need to be accounted for as an income if it relates to the financial year.