Question

If cash received for future services is initially recorded in revenue accounts and the company has not yet performed all of the required services at the end of the accounting period, then failure to make an adjusting entry will cause
liabilities to be overstated.
revenues to be understated.
revenues to be overstated.
accounts receivable to be overstated.

Answer 1

Answer:

revenues to be overstated.

Explanation:

The sale recorded is not recognized completely at the end of the year and it been recorded in the revenue account. No adjustment has been performed at the year end to settle this accounting issue. The unearned revenue at the end of year which require the services to be performed in future overstating the revenue and understating the liabilities.