Question

Unearned revenues are: Multiple Choice Increases in assets as a result of delivering products or services to a customer. Expenses incurred because a customer has paid in advance. Assets that will be used over time. Transferred to revenue when products and services are delivered. Decreases in an asset.

Answer 1

Unearned revenues are assets that will be used over time and are recorded as liabilities until the products or services are delivered to the customer.

Step-by-step explanation:

Unearned revenues are assets that will be used over time. They are typically recorded as liabilities on a company's balance sheet until the products or services are delivered to the customer. Once the products or services are delivered, the unearned revenue is transferred to revenue on the income statement. This means that unearned revenues are decreases in an asset.

Answer 2

Unearned revenues are liabilities reflecting payment for products or services not yet delivered, becoming revenue upon delivery. Total revenue is calculated by multiplying product price by quantity sold.

Step-by-step explanation:

Unearned revenues are considered a liability on the balance sheet of a business because this represents money received for products or services not yet delivered. When a company receives payment for a service or product that it has yet to provide or deliver, it records this as unearned revenue, which will only be recognized as actual revenue when the good or service is delivered. This concept is critical because it adheres to the revenue recognition principle of accounting, ensuring that revenues are matched with the expenses incurred in earning them.

Total revenue in a company is calculated by the formula: Total Revenue = Price x Quantity. This overall income greatly contributes to the gains that drive economic growth, ranging from individual labor wages to large corporate earnings and investments.