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amounts received in advance from a customer for future products or services are initially recorded as...

amounts received in advance from a customer for future products or services are initially recorded as liabilities.

True or False

Business   Accounting   
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Answer #1

Amounts received in advance from a customer for future products or services are initially recorded as liabilities.

The given statement is True.

When cash is received in advance from a customer for services to be provided in future, It creates a liability and the following journal entry is prepared:

General Journal Debit Credit
Cash ----------
Unearned revenue ------------

When goods are delivered or services are rendered, unearned revenue becomes revenue earned and then unearned revenue is debited and revenue is credited.

Kindly comment if you need further assistance. Thanks

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