Additional Current Liabilities Practice Quiz

Q: True or False: A $25,000, five-year note for a trailer that requires a monthly payment of $1,000 should go under the asset section of the balance sheet.

Correct. Because there is a payment due every month, this is considered a current liability.

Q: Why is deferred revenue considered a liability?

Correct! The payment is considered a liability because there is still the possibility that the good or service may not be delivered, or the buyer might cancel the order.

Q: In the case of a company's deferred revenues, which occurs first?

Correct! Deferred revenues indicate that a company has received money from a customer before it has been earned.

Q: When a customer gives you an advance payment:

Correct! When a customer gives you an advance payment, you will increase the deferred revenue account. As you deliver goods or services, your deferred revenue account will decrease.