Limited time offers, prepayments, and retainers are all examples of which type of receivable?

• A. Accounts receivable
• B. Notes receivable
• C. Advances to customers
• D. Unearned revenue

Answer: (C)

Verified step by step guidance

1. Step 1: Understand the concept of 'Advances to customers'. These are payments made by customers before goods or services are delivered. They represent a liability for the company until the goods or services are provided.
2. Step 2: Recognize that limited time offers, prepayments, and retainers are examples of payments made in advance by customers. These payments are classified as 'Advances to customers' because the company has not yet earned the revenue.
3. Step 3: Differentiate 'Advances to customers' from other types of receivables. Accounts receivable refers to amounts owed by customers for goods or services already delivered, while notes receivable refers to formal written promises to pay a specific amount at a future date.
4. Step 4: Understand why 'Unearned revenue' is related but not the correct classification here. Unearned revenue is a liability account that records revenue received before it is earned, but it does not specifically refer to the payments made by customers in advance.
5. Step 5: Conclude that the correct classification for limited time offers, prepayments, and retainers is 'Advances to customers', as these represent payments made by customers before the company has delivered goods or services.