Cash collected from customers in advance of providing the goods or services creates a liability which is later reduced when the goods or services are provided. True or False

Question

Annabel Mora

Business

30 January, 13:06

Cash collected from customers in advance of providing the goods or services creates a liability which is later reduced when the goods or services are provided. True or False

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Answers (1)

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Julius Cannon · Answer 1

True

Explanation:

Because the amount we receive in advance to the services or product delivery are treated as liability. We have to compensate them by the product which we mutually agreed on. So this means that if we don't deliver the goods or services then we have to pay back the amount that we received from the client. This means this liability will only waive off if we either pay the amount back or we compensate with the amount of goods mutually agreed upon. So something we have to pay the customer in compensation of the payment received which is also known as consideration.