Do You Debit Or Credit Unearned Revenue

You will record these transactions in two accounts.

Do you debit or credit unearned revenue. If a debit increases an account you will decrease the opposite account with a credit. The adjusting entry for unearned revenue depends upon the journal entry made when it was initially recorded. At the end of the period unearned revenues must be checked and adjusted if necessary. Debit the cash bank account with the total amount received i e 6 000 and create a current liability of unearned revenue by crediting the same amount.

Unearned revenue is money received from a customer for work that has not yet been performed. Also each transaction is always recorded in two accounts. Since your company did not yet pay its employees the cash account is not credited instead the credit is recorded in the liability account wages payable. Debits and credits are equal but opposite entries in your books.

This is advantageous from a cash flow perspective for the seller who now has the cash to perform the required services. At the end of 12 months all the unearned service revenue unearned will have been taken to the service revenue account earned. Since the cash is received it is the creation of the asset. A debit is an entry made on the left side of an account.

When you record unearned fees or revenue it only hits the balance sheet. There are two ways of recording unearned revenue. A debit and credit account. A credit to a liability account increases its credit balance.

Unearned revenue is originally entered in the books as a debit to the cash account and a credit to the unearned revenue account. 1 the liability method and 2 the income method. Unearned revenue is a liability for the recipient of the payment so the initial entry is a debit to the cash account and a credit to the unearned revenue account. The credit and debit are the same amount as is standard in double entry bookkeeping.

Debit cash or ar asset account credit unearned revenue liability it is a liability until the.