Question

Testbank Multiple Choice Question 52 Which of the following properly describes a deferral? O Cash is received before revenue is recognized. O Cash is paid after expense is incurred. O Cash is paid in the same time period that an expense is incurred. O Cash is received after revenue is recognized. Testbank Multiple Choice Question 65 When a revenue is collected and recorded in advance, it is normally accounted for as a(n) revenue O prepaid O unearned O cash O accrued Testbank Multiple Choice Question 78 Under the cash-basis of accounting, revenues are recorded O when cash is received. O when expenses are incurred. O when the performance obligation is satisfied. O when the performance obligation is satisfied and cash is received.

Answer 1

A deferral is when cash is received before revenue is recognized, as in the case of unearned revenue. In cash-basis accounting, revenues and expenses are recorded only when cash is received or paid, respectively.

Step-by-step explanation:

The answer to Testbank Multiple Choice Question 52, which asks which option properly describes a deferral, is: Cash is received before revenue is recognized. This occurs when money is received prior to services being provided or goods being delivered, and thus, the revenue for these funds cannot be recognized until the services or goods are completed or delivered.

As for Testbank Multiple Choice Question 65, the correct way to account for revenue that is collected and recorded in advance is as unearned revenue. This is a liability on the balance sheet because it represents services or products that are owed to a customer.

Finally, under Testbank Multiple Choice Question 78, in the cash-basis of accounting, revenues are recorded when cash is received. This method of accounting recognizes transactions only when cash changes hands.