What occurs to the cash collected that is not recognized as revenue?

When cash is collected but not recognized as revenue, it is recorded as deferred revenue. This accounting treatment reflects the obligation of the company to provide goods or services in the future, even though the cash has been received at the current time. Deferred revenue is considered a liability because it represents an obligation to deliver a product or service that has already been paid for by the customer, but not yet delivered.

In contrast, options discussing operating income and cash reserves do not accurately represent the nature of deferred revenue. Operating income reflects revenue recognized for services or goods actually delivered, while cash reserves pertain to actual cash available without ties to future obligations. Accounts receivable relates to income yet to be collected, which does not apply in this scenario where cash is already in hand. Therefore, deferred revenue is the correct accounting treatment for cash collected but not recognized as revenue.