When a magazine company collects cash for selling a subscription, it is an example of: Multiple Choice An accrued liability transaction. An accrued receivable transaction.

Question

Messiah Young

Business

15 February, 20:34

When a magazine company collects cash for selling a subscription, it is an example of: Multiple Choice An accrued liability transaction. An accrued receivable transaction.

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Answers (1)

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Jamie Moody · Answer 1

The complete question is:

When a magazine company collects cash for selling a subscription, it is an example of:

1. A deferred revenue transaction

2. An accrued receivable transaction

3. A prepaid expense transaction

4. An accrued liability transaction

Answer:

A deferred revenue transaction.

Explanation:

In this scenario the magazine company has collected cash for a subscription. Subscriptions are payments that are made to gain access to a certain service. Take for example if a subscription has to be paid to a company to access their website for information. The cash has been collected but service is to be provided in the future. When service is not yet provided and payment is collected it is referred to as deferred revenue.

This is because the service has not yet been performed so revenue is not yet earned. When service is provided then the revenue is recognised.