All of the following situations contribute to the need for a company to recognize deferred revenues, except for:

A) partially executed contracts between buyers and sellers.

B) the requirement by sellers for the prepayment of goods and services.

C) mutually unexecuted contracts between buyers and sellers.

D) the seller has collected a deposit but has an outstanding performance obligation under the contract.

Question

Business

Gould

8 February, 13:14

All of the following situations contribute to the need for a company to recognize deferred revenues, except for:

A) partially executed contracts between buyers and sellers.

B) the requirement by sellers for the prepayment of goods and services.

C) mutually unexecuted contracts between buyers and sellers.

D) the seller has collected a deposit but has an outstanding performance obligation under the contract.

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Answers (1)

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Preston Reed · Answer 1

Answer: C) mutually unexecuted contracts between buyers and sellers.

Explanation:

Mutually Unexecuted contracts refer to a situation where both parties being the buyer and the seller have not executed their parts of the bargain or rather fulfilled their parts of the contract.

In such a case, even though legally, there is an obligation to perform due to the signing of a contract, Accounting wise, there is no need to record a liability.

This is why Mutually Unexecuted contracts do not contribute to the need to recognize deferred revenue.