A deferred revenue liability arises when:

A Revenue is earned

B Cash is received before the service is performed or goods delivered

C Expenses are paid

D An asset is purchased

✓ Correct Answer: Option B

Deferred (unearned) revenue is a liability because the company has received payment but owes future goods/services.

💡 Why is B) the correct answer?

The correct answer to the question "A deferred revenue liability arises when:" is Option B: Cash is received before the service is performed or goods delivered.

The other options — A) Revenue is earned, C) Expenses are paid, D) An asset is purchased — are incorrect for this CPA Exam Prep question. As explained above: Deferred (unearned) revenue is a liability because the company has received payment but owes future goods/services.

📚 About This CPA Exam Prep Practice Question

This 2-level CPA Exam Prep question from the Financial Accounting (FAR) topic is part of BrainForge Quiz's free exam preparation library. Each question includes the correct answer and a detailed explanation to help you understand the underlying concept, not just memorize the answer.

How to use this page: Read the question above, consider all four options (A through D), then check the highlighted correct answer and explanation. For active timed practice, start a free CPA Exam Prep practice test or use flashcards for spaced repetition review.

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A deferred revenue liability arises when:

✓ Correct Answer: Option B

📚 About This CPA Exam Prep Practice Question

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