Question

A company that sprays chemicals in residences to eliminate or prevent infestation of insects requires that customers prepay for 3 months’ service at the beginning of each new quarter. Which term appropriately describes the prepayment from the perspective of the service provider?

Answer 1

Answer:

Unearned/ deferred revenue

Explanation:

Unearned/ deferred revenue is money obtained from a customer for a service that is yet to be rendered or for a product yet to be delivered. In accounting terms, unearned revenue is recorded as a liability on the company's statement of financial position.