Question

The Jacksonville Jaguars sell season tickets to NFL football games. There are 10 home games during the season, which runs from August through December. During February, 65,000 season tickets were sold for $12,000,000 cash. Which account will be credited by the Jacksonville Jaguars upon receipt of the $12,000,000?

Answer 1

Answer: Deferred income which must be a liability accounts.

Explanation:

Revenue earned on a service is recognised when the service has been performed, it's probable that economic benefits of the services will be enjoyed by the client, the price of the services can be measured reasonably, cost Incurred on the performance of the services can be measured reasonably.

On the above scenario the services has not been perform, the cost of performance cannot be measured, these and more shows that Jaguar cannot recognize the sum as an income but rather as a deferred income(liabilities) which will later be transferred to income accounts as the necessary conditions for recognition as income are met.