Deferred and Accrued Revenues/Expenses – True or False

Practice Question

Intro to Financial Accounting
Adjustments and Quality of Earnings
Deferred and Accrued Revenues/Expenses
True or False

Deferred revenue is classified as an asset on the balance sheet.

Answer +
Final Answer: FALSE
Explanation +

Deferred revenue is a liability because it represents an obligation to deliver goods or services to customers in the future. Recognizing it as a liability is consistent with the revenue recognition principle, which states that revenue should only be recognized when earned.