Unearned Revenue In Accounting
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Unearned revenue sometimes referred to as deferred revenue is payment received by a company from its customers for products or services that will be delivered at some point in the future.
Unearned revenue in accounting. Unearned revenue is a liability or money a company owes. This is money paid to a business in advance before it actually provides goods or services to a client. Hence they are also called advances from customers. So lets now turn to an example and see what the normal journal entries are in the accounting for unearned revenue.
When the goods or services are provided an adjusting entry is made. On 31 march 20xx it received 20 000 from a client for some earth moving work to be completed. This is advantageous from a cash flow perspective for the seller who now has the cash to perform the required services. In accounting unearned revenue is prepaid revenue.
Unearned revenue example and journal entries. 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 term is used in accrual accounting in which revenue is recognized only when. Our trusty abc ltd has its month end april 20xx accounts to prepare.
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