When a customer pays in advance for a product or service such as a prepaid...
90.2K
Verified Solution
Link Copied!
Question
Accounting
When a customer pays in advance for a product or service such as a prepaid insurance policy, the business that sold that item will record the cash received as an asset and the future obligation to provide the item as a liability. Please give some thought to different business situations where the customers may pay in advance and provide an example here.
1. Using your example, which account is debited to record the payment received? Which account is credited?
2. When the business provides the product or service, which account is debited? Which account is credited?
3. What do we mean by the term deferred revenue?
4. How would these transactions be recorded under the cash basis of accounting? What are the benefits of recording the deferral under the accrual basis?
Get Answers to Unlimited Questions
Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!
Membership Benefits:
- Unlimited Question Access with detailed Answers
- Zin AI - 3 Million Words
- 10 Dall-E 3 Images
- 20 Plot Generations
- Conversation with Dialogue Memory
- No Ads, Ever!
- Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!
Other questions asked by students
StudyZin's Question Purchase
1 Answer
$0.99
(Save $1 )
One time Pay
- No Ads
- Answer to 1 Question
- Get free Zin AI - 50 Thousand Words per Month
Unlimited
$4.99*
(Save $5 )
Billed Monthly
- No Ads
- Answers to Unlimited Questions
- Get free Zin AI - 3 Million Words per Month
*First month only
Free
$0
- Get this answer for free!
- Sign up now to unlock the answer instantly
You can see the logs in the Dashboard.