What is unearned revenue?
a) Revenue that has been earned but not yet recorded
b) Revenue that has been recorded but not yet earned
c) Revenue that has been earned and recorded
d) Revenue that cannot be earned
Answer: b) Revenue that has been recorded but not yet earned
Unearned revenue is also known as:
a) Prepaid revenue
b) Deferred revenue
c) Accrued revenue
d) Unrecorded revenue
Answer: b) Deferred revenue
Which of the following industries typically has unearned revenue?
a) Manufacturing
b) Healthcare
c) Retail
d) Consulting
Answer: d) Consulting
How is unearned revenue reported on the balance sheet?
a) As a liability
b) As an asset
c) As an expense
d) As equity
Answer: a) As a liability
When is unearned revenue recognized as revenue?
a) When it is earned
b) When it is received
c) When it is recorded
d) When it is refunded
Answer: a) When it is earned
Which accounting principle is associated with unearned revenue?
a) Matching principle
b) Revenue recognition principle
c) Going concern principle
d) Cost principle
Answer: b) Revenue recognition principle
Which of the following journal entries would be recorded for unearned revenue?
a) Debit Accounts Receivable, credit Unearned Revenue
b) Debit Unearned Revenue, credit Accounts Payable
c) Debit Cash, credit Unearned Revenue
d) Debit Unearned Revenue, credit Revenue
Answer: c) Debit Cash, credit Unearned Revenue
What happens to unearned revenue over time?
a) It decreases
b) It remains the same
c) It increases
d) It becomes an expense
Answer: a) It decreases
Which financial statement is affected by unearned revenue?
a) Income statement
b) Balance sheet
c) Cash flow statement
d) Statement of retained earnings
Answer: b) Balance sheet
What is the impact of recognizing unearned revenue as revenue?
a) It increases assets and equity
b) It decreases liabilities and expenses
c) It increases liabilities and expenses
d) It decreases assets and equity
Answer: a) It increases assets and equity
Which of the following is an example of unearned revenue?
a) Rent received in advance
b) Salary paid to employees
c) Purchase of inventory
d) Advertising expenses
Answer: a) Rent received in advance
Unearned revenue is commonly associated with which type of business transaction?
a) Sales of goods or services
b) Payment of expenses
c) Borrowing money from a bank
d) Investment in stocks
Answer: a) Sales of goods or services
How is unearned revenue treated for tax purposes?
a) It is taxed when received
b) It is taxed when earned
c) It is not subject to tax
d) It is tax-deductible
Answer: a) It is taxed when received
Which financial statement is affected when unearned revenue is earned?
a) Income statement
b) Balance sheet
c) Cash flow statement
d) Statement of changes in equity
Answer: a) Income statement
True or False: Unearned revenue is always a long-term liability.
Answer: False
Which accounting method is commonly used to account for unearned revenue?
a) Cash basis accounting
b) Accrual basis accounting
c) FIFO (First-In, First-Out) method
d) LIFO (Last-In, First-Out) method
Answer: b) Accrual basis accounting
When does unearned revenue become earned revenue?
a) When the customer makes a payment
b) When the goods or services are delivered
c) When the invoice is issued
d) When the financial year ends
Answer: b) When the goods or services are delivered
Which of the following is an adjusting entry related to unearned revenue?
a) Debit Unearned Revenue, credit Revenue
b) Debit Unearned Revenue, credit Accounts Receivable
c) Debit Unearned Revenue, credit Cash
d) Debit Revenue, credit Unearned Revenue
Answer: a) Debit Unearned Revenue, credit Revenue
What is the impact of unearned revenue on cash flow?
a) It increases cash flow
b) It decreases cash flow
c) It has no impact on cash flow
d) It depends on the timing of revenue recognition
Answer: c) It has no impact on cash flow
What happens to unearned revenue if a customer requests a refund?
a) It is reversed and recorded as an expense
b) It remains as unearned revenue until the refund is processed
c) It is reclassified as earned revenue immediately
d) It is removed from the books entirely
Answer: b) It remains as unearned revenue until the refund is processed