Oracle Financials Cloud: General Ledger 2017 Implementation Essentials — Question 17

An invoice for $100 USD has revenue deferred due to unmet payment-based contingencies and the Invoice Accounting Used for Credit Memos profile option is set to Yes. A credit memo of $50 USD has been issued against this invoice.
Explain how revenue accounting will occur.

Answer options

• A. Earned revenue will be debited for $50 USD.
• B. Unearned revenue will be credited for $100 USD.
• C. Earned revenue will be credited for $50 USD.
• D. Unearned revenue will be debited for $50 USD.

Correct answer: C

Explanation

The correct answer, C, is accurate because when a credit memo is issued for $50 USD, it reduces the recognized earned revenue by that amount. The other options are incorrect as A suggests debiting earned revenue which does not happen, B incorrectly indicates that unearned revenue is credited for the entire invoice amount, and D inaccurately states that unearned revenue is debited.