Question

All of the following are true regarding deferred revenues except: They are payments received in advance of services performed. The adjusting entry for deferred revenues increases assets and increases revenues. The adjusting entry for deferred revenues increases revenues and decreases liabilities. They are liabilities. As they are earned, they become revenues.

Answer 1

Answer:

The correct answer is letter "C": The adjusting entry for deferred revenues increases revenues and decreases liabilities

Explanation:

Deferred Revenue is accrued payments that a corporation collects for goods or services that it has not yet produced or dispatched. Another term for deferred revenue is unearned revenue. Whereas normal payments for goods or services are recorded as revenue on the company's Income Statement, deferred revenue is recorded as a liability until the product is shipped.

For accounting purposes, the adjusting entry for the deferred revenue by increasing an asset account (cash) with a debit and by increasing a liability account (unearned revenue) with a credit.