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      Question

      Under accrual accounting, which of the following best

      describes the treatment of income received in advance?
      A Revenue for current period Correct Answer Incorrect Answer
      B Contingent liability Correct Answer Incorrect Answer
      C Deferred revenue shown as a current liability Correct Answer Incorrect Answer
      D Sundry receivable Correct Answer Incorrect Answer
      E Asset under construction Correct Answer Incorrect Answer

      Solution

      Income received before the actual service is rendered is not recognized as revenue. It is considered deferred revenue and shown as a current liability until earned.

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