Question

The journal entry to record the prior year’s deferred Inflows: property taxes (those expected to be collected more than 60 days beyond year-end) as revenue in the current year would include:
a. A credit to Revenues Control.
b. A debit to Deferred Inflows: Property Taxes; and a credit to Revenues Control.
c A debit to Deferred Inflows: Property Taxes.
d. A debit to Revenues Control.

Answer 1

Answer:

b. A debit to Deferred Inflows: Property Taxes; and a credit to Revenues Control.

Explanation:

In accrual accounting revenues and expenses are not recognised till they are earned or incurred.

Deferred revenue is the income for goods that have not been delivered yet. For example if a business made sales of books worth $500 but have not delivered the goods to the buyer, the income realised is credited to deferred income. When the books have been delivered the income can now be recognised and moved to revenue account.

So in the scenario given the property taxes have not been collected yet and Soni's recorded as Deferred inflow from the previous year. When the taxes are collected we debit Deferred Inflow- Property taxes and credit Revenue Control.