Question

All of the following situations contribute to the need for a company to recognize deferred revenues, except for:

Answer 1

Answer: C) mutually unexecuted contracts between buyers and sellers.

Explanation:

Mutually Unexecuted contracts refer to a situation where both parties being the buyer and the seller have not executed their parts of the bargain or rather fulfilled their parts of the contract.

In such a case, even though legally, there is an obligation to perform due to the signing of a contract, Accounting wise, there is no need to record a liability.

This is why Mutually Unexecuted contracts do not contribute to the need to recognize deferred revenue.