Which statement best describes the difference between accounts receivable and deferred revenue?

• A. Deferred Revenue is a liability representing cash collected but not yet revenue; Accounts Receivable is a current asset representing revenue earned but not yet collected.
• B. Deferred Revenue is an asset; Accounts Receivable is a current liability.
• C. Deferred Revenue is revenue recognized; Accounts Receivable is cash.
• D. Deferred Revenue is a liability representing revenue earned; Accounts Receivable is cash on hand.

Answer: (A)

The main idea is matching what each balance sheet item represents with when value is realized. Accounts receivable shows money you’ve earned but haven’t collected yet, so it’s a current asset. Deferred revenue shows money you’ve collected before you’ve earned the related goods or services, so it’s a liability because you owe that performance. When you later provide the goods or services, the liability is reduced and revenue is recognized.

This makes the statement correct: deferred revenue is a liability for cash collected but not yet revenue, and accounts receivable is a current asset for revenue earned but not yet collected. The other descriptions mix up asset vs. liability roles, or confuse revenue recognition with what each account represents.