Question

The primary difference between accrued revenues and unearned revenues is that accrued revenues have:________. a) been recorded and unearned revenues have not. b) not been recognized and accrued revenues have been. c) been paid and unearned revenues have not. d) not been recorded and unearned revenues have.

Answer 1

Answer: D) not been recorded and unearned revenues have.

Explanation:

Accrued revenue is a term used to describe a sale that has been recognized by the seller, but which has not yet been billed to the customer. Accrued revenue is needed in order to match revenues with expenses. The absence of accrued revenue would tend to show excessively low initial revenue levels and low profits for a business, which does not properly indicate the true value of the organization.

Unearned revenue on the other hand is the money received from a customer for work that has not yet been performed (in advance payment). This is an advantage to the seller who now has the cash to perform the required services. Unearned revenue is a liability for the recipient of the payment.