CFA CFA Level 1 CFA Level 1 Question of the Week – Financial Reporting and Analysis

CFA Level 1 Question of the Week – Financial Reporting and Analysis

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    • Matt_AnalystPrep
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        • CFA Charterholder
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        If at the end of the financial
        reporting period, a company receives cash for books which are to be delivered
        in the following period, the most appropriate accounting entry would be to
        record the transaction as:

        • A. accrued revenue.
        • B. deferred revenue.
        • C. prepaid expenses.
      • Matt_AnalystPrep
        Participant
          • CFA Charterholder
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          The correct answer is B.

          The company will
          record the cash received as unearned revenue. Unearned revenue or deferred
          revenue arises when a company receives cash prior to earning revenues. The
          company will earn revenues when the books are delivered in the following year.

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          OMG my brain – I read ‘accrued revenue’ as ‘unaccrued revenue’.

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