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Financial Reporting and Analysis Q130

0. In 2012, Nerosoft Co. recorded unearned revenue related to their latest operating system license, which the company will recognize as revenue in 2013. Ignoring income taxes, this recognition of the operating system revenue will most likely have which of the following effects on cash from operations in 2012?

  • Option : C
  • Explanation : The company received the cash in 2012 when it recorded the unearned revenue and it was a part of the cash from operations in that year. Hence, there will be an increase in cash flow from operations. In 2013, the revenue is earned, but there is no cash exchanged, and hence no effect of the cash from operations, ignoring taxes.
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