Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

3. Accrual Accounting Concepts

Revenue Recognition and Expense Recognition

Financial Accounting

3. Accrual Accounting Concepts

Revenue Recognition and Expense Recognition

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Multiple Choice

Deferred revenue is a(n):

expense

asset

revenue

liability

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Verified step by step guidance

Understand the concept of deferred revenue: Deferred revenue refers to money received by a company for goods or services that have not yet been delivered or performed. It represents an obligation to provide those goods or services in the future.

Recognize the classification of deferred revenue: Since the company owes goods or services to the customer, deferred revenue is considered a liability. It reflects the company's obligation to fulfill its promise.

Differentiate deferred revenue from other financial elements: Deferred revenue is not an expense because it does not represent a cost incurred by the company. It is not an asset because it does not provide future economic benefits. It is not revenue because the earnings process is not yet complete.

Relate deferred revenue to the accounting equation: In the accounting equation (Assets = Liabilities + Equity), deferred revenue increases the liabilities side because it represents an obligation.

Conclude the classification: Based on the explanation above, deferred revenue is correctly classified as a liability on the balance sheet until the company fulfills its obligation by delivering goods or services.