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

  1. Retained earnings increases.
  2. Liabilities are not affected.
  3. Revenue has increased.
  4. 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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