A contractor receives a customer deposit before earning the work. How should the amount generally be viewed until earned?
Correct Answer
B) Unearned revenue.
Cash received before work is earned may create unearned revenue or a liability until earned under the accounting method used.
Why This Is the Correct Answer
Cash received before work is earned may create unearned revenue or a liability until earned under the accounting method used.
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For a lump-sum construction contract, CDTFA Publication 9 explains that tax generally applies to materials furnished and installed by the contractor. Which cost is the tax base when the contractor is not acting as a seller of the materials?