Recording Unearned Revenue Journal Entry

The adjusting entry for unearned revenue depends upon the journal entry made when it was initially recorded.

Recording unearned revenue journal entry. The company receives cash an asset account on the balance sheet and records deferred revenue a liability account on the balance sheet. There are two ways of recording unearned revenue. The following unearned revenue journal entry example provides an understanding of the most common type of situations where such a journal entry account for and how one can record the same as there are many situations where the journal entry for unearned revenue pass it is not possible to provide all the types of examples. 1 the liability method and 2 the income method.

This accounting method implies recording the advanced payment asincome. For example if you charge a customer 1 200 for 12 months of services 100 per month will turn into earned revenue while the remaining amount will still be deferred revenue. Journal entries of unearned revenue. In order to ensure your net profit is accurate you must record unearned revenue properly.

How unearned revenue is reported. Unearned revenue is money received for goods and services that have not yet been provided. Debit the debit to accounts receivable reflects the amount invoiced and due from the customer under the terms of the contract. The following journal entry would reflect it like this.

Unearned revenue journal entry bookkeeping explained. As you deliver goods or perform services parts of the deferred revenue become earned revenue. Recording deferred revenue applies to the company s balance sheet. When the company receives payment.

Deferred revenue is sometimes called unearned revenue deferred income or unearned income. Credit at the date of invoicing the business has not supplied any services to the customer and the revenue is therefore unearned. In the example from part 1 the company receives a 120 advance payment relating to a twelve month magazine subscription.