Accounting for IGCSE & O level - The Fundamentals Of Accounting (Section 31 - No. 24)
What is the effect on the financial statements when a customer prepays for a service?
An increase in assets and an increase in liabilities.
An increase in assets and a decrease in liabilities.
A decrease in assets and an increase in liabilities.
A decrease in assets and a decrease in liabilities.
Explanation
When the customer pays, cash increases. Unearned revenue increases (a liability).
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