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Changes in Trade Receivables

Which of the ...

Question

Which of the following correctly describes the effects of initially recording deferred revenue when cash is received from a customer?

A

Retained earnings increases.

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B

Liabilities are not affected.

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C

Revenue has increased.

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D

Net Income is not affected

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Solution

The correct option is D
Net Income is not affected

Answer d. Net Income is not affected
Explanation: Net income is not affected when cash is received from a customer on sale of product or services, since the exchange to goods and services is recorded as it is, by receiving cash.

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