Which of the following would typically appear in the Deferred Revenue T-account?

• A. A debit when cash is received from customers for goods already delivered
• B. A credit when cash is received in advance of providing goods or services
• C. A debit when revenue is earned and recognized
• D. A credit when goods or services are delivered to customers

Answer: (C)

Verified step by step guidance

1. Understand the concept of Deferred Revenue: Deferred Revenue represents cash received by a company in advance of delivering goods or services. It is recorded as a liability because the company has an obligation to fulfill the delivery of goods or services in the future.
2. Analyze the T-account structure: A T-account for Deferred Revenue will have debits on the left side and credits on the right side. Credits increase the liability, while debits decrease it.
3. Identify the scenarios: When cash is received in advance of providing goods or services, it is recorded as a credit in the Deferred Revenue T-account because the liability increases. When revenue is earned and recognized (goods or services are delivered), it is recorded as a debit because the liability decreases.
4. Match the options to the T-account entries: A credit is recorded when cash is received in advance of providing goods or services, and a debit is recorded when revenue is earned and recognized.
5. Conclude the correct entries: The correct entries in the Deferred Revenue T-account are: (1) A credit when cash is received in advance of providing goods or services, and (2) A debit when revenue is earned and recognized.