What happens when a business receives cash in advance from a customer? A : Assets and...
What happens when a business receives cash in advance from a customer?
A :
Assets and stockholders' equity increase.
B :
Assets increase but stockholders' equity decreases.
C :
Assets and liabilities increase.
D :
Assets, liabilities, and stockholders' equity remain unchanged.
Homework Answers
When cash is received in advance from a customer, it has the following effects:
- Assets increase in the form of cash.
- Liabilities increase in the form of unearned revenue.
Cash received in advance from a customer for services to be provided in future, is an unearned revenue.
Correct option is C.
It does not effect stockholders equity since it is not the revenue earned.
Kindly comment if you need further assistance.
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What happens when a business receives cash in advance from a
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A :
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