Chapter 8, Problem 11RQ

To determine

Deferred revenues:

Collection of cash in advance to render service or to deliver goods in future is known as unearned revenues. These unearned revenues are considered as liabilities until they are earned. For the portion of rendered services or delivered goods, revenues would be recognized by way of passing an adjusting entry. Unearned revenue is also known as deferred revenues, because at the receiving of payment in advance, revenues are not recognized but deferred until they are earned. Example: Unearned service revenue.

To Indicate: The way in which the retailers like Company M, Company AE, and Incorporation A account for the sale of gift cards.