Final answer:
The receipt of cash before services are performed is an accounting practice where the payment is recorded as a liability called unearned revenue. It represents a company's obligation to deliver goods or services in the future.
Step-by-step explanation:
When a company receives cash in advance of delivering goods or services, it records this payment as a liability named unearned revenue. Unearned revenue is a prepayment that requires future delivery of goods or performance of services to fulfill the obligation.
For example, if a customer pays in advance for a one-year subscription, the company would record the cash as unearned revenue and then recognize the revenue on their income statement gradually over the year as they provide the service.