Question

Which of the following shows how the event "collected cash for services to be rendered in the future" affects a company's financial statements?

A. Balance Sheet Income Statement Statement of Cash Flows

Assets = Liab. + Equity Rev. − Exp. = Net Inc.
+ + NA NA NA NA +OA

B. Balance Sheet Income Statement Statement of Cash Flows

Assets = Liab. + Equity Rev. − Exp. = Net Inc.
+ NA + NA NA NA +OA

C. Balance Sheet Income Statement Statement of Cash Flows

Assets = Liab. + Equity Rev. − Exp. = Net Inc.
+ + NA NA NA NA NA

D. Balance Sheet Income Statement Statement of Cash Flows

Assets = Liab. + Equity Rev. − Exp. = Net Inc.
+ + NA NA + − +OA

Answer 1

When a company collects cash for future services, it is recorded as a liability on the balance sheet. It does not affect the income statement or the statement of cash flows.

Step-by-step explanation:

When a company collects cash for services to be rendered in the future, it is recorded as a liability on the balance sheet. The amount collected is not yet considered revenue, so it does not appear on the income statement. It also does not affect the statement of cash flows since it is a non-cash transaction. The correct option is A: Balance Sheet, Income Statement, Statement of Cash Flows.