Final answer:
Yes, when a company receives cash in advance for services or products not yet delivered, it has a liability to the customer known as unearned or deferred revenue. This liability is recorded on the balance sheet and reflects the company's obligation to the customer.
Step-by-step explanation:
The student's main question revolves around whether a company that receives cash upfront for services or products has a liability to deliver those services or products, which is true. When a company receives payment before services or products are provided, it results in a liability known as unearned revenue or deferred revenue. This is because the company is now obligated to fulfill its service or product delivery to the customer. This obligation will be recorded on the company's balance sheet as a liability, and it will remain as such until the service is performed or products are delivered.
It's important for students studying business or accounting to understand how companies finance their operations. Borrowing methods such as bank loans or issuing bonds are ways for a firm with a history of revenues and profits to raise capital. Additionally, using credit implies going into debt, where a credit card is one form of short-term borrowed funds.