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<p>Advance payment from the customer is recorded as liability because its</p> <p>A . Going concern assumption</p> <p>B . Historical cost principle</p> <p>C . Revenue recognition principle</p>
C is the right answer, Revenue recognition principle tells us that Revenue is not recognized before it is earned, advances will be recoded as
Advance Dr,
Unearned Revenue Cr.
Option C
Revenue recognition principle
Its option C
According to the IAS-18 Revenue recognition it says.
Sales can not be recognize until the criteria met.
Revenue from the sale of goods shall be recognized when all the following conditions have been satisfied:
1- the entity has transferred to the buyer the significant risks and rewards of ownership of the goods;
the entity retains neither continuing managerial involvement to the degree usually associated with
ownership nor effective control over the goods sold;
2- the amount of revenue can be measured reliably;
3-it is probable that the economic benefits associated with the transaction will flow to the entity; and
the costs incurred or to be incurred in respect of the transaction can be measured reliably.
Since sales is not yet been recognized it surely must be a liability until its being recognized.
Option C would be the right answer
Option C will be the answer. Advance payments will be liability as the services are yet to be provided.
correct answer is c
B is the relevant answer to describe the position in a Financial statements.
