Accounting & the 3 Statements
Walk me through how a customer prepaying $100 cash for a future service hits the three statements, then how recognition works later (ignore taxes/COGS for the prepayment).
Model answer
At prepayment: Cash flow statement — cash from operations +$100 (you received cash, but no revenue yet). Balance sheet — cash (asset) +$100; deferred (unearned) revenue, a LIABILITY, +$100 →…
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