GK
ACCOUNTING
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Will not be shown anywhere
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Will be credited to Profit and Loss Account
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Will be shown on the liabilities side of the balance sheet only
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Will be shown in Profit and Loss Account by way of deduction from the income received
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Detailed explanation-1: -Income received in advance but not earned will appear in the balance sheet as a liability.
Detailed explanation-2: -will be shown on the liabilities side of the balance sheet only.
Detailed explanation-3: -The effect of this entry will be that the balance in he income account will be equal to the amount of income earned for the current accounting period, and the new account of income received in advance will be shown as a liability in the balance sheet.
Detailed explanation-4: -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.