CPA Accountant Review Questions

Answer - B - A deferred credit will appear on the balance sheet as a liability.

Key Takeaway: A deferred credit is income received by a business that has not yet been reported as income, usually including Unearned Income. For example, a newspaper publisher might defer a 3-year subscription to match revenue against later printing expenses (which is recommended under the matching principle). The deferred credit is classified under noncurrent liabilities. When a portion of the deferred credit is earned, the entry is to debit deferred credit and credit revenue.