Final answer:
When revenues are received in advance, they should be recorded as deferred revenue on the balance sheet, increasing assets and liabilities. There's no immediate impact on the income statement until the service is performed.
Step-by-step explanation:
The correct accounting treatment for receiving revenues in advance for services to be provided in the future is to record it as deferred revenue, which is an answer from option B in the multiple-choice options provided. Deferred revenue is a liability because it represents an obligation to deliver products or services in the future. On the balance sheet, this liability will be listed as deferred revenue under current liabilities if the service is to be fulfilled within a year, or long-term liabilities if longer than a year.
As for the impact on the balance sheet when revenue is received in advance, there will be an increase in cash or cash equivalents (an asset), balanced by an increase in liabilities (deferred revenue). There's no immediate impact on the income statement because the revenue is not recognized until the service is performed. Once the service is provided, the deferred revenue is then recognized as earned revenue on the income statement and the liability is reduced accordingly.