Unearned Revenue Is Debit Or Credit
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The business owner enters 1200 as a debit to cash and 1200 as a credit to unearned revenue.
Unearned revenue is debit or credit. The earned revenue is recognized with an adjusting journal entry called an accrual. 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 debit credit rule also requires the increase in liabilities to be credited. 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 the month the owner debits unearned revenue 400 and credits revenue 400. Debit cash or ar asset account credit unearned revenue liability it is a liability until the. Debit unearned revenue. Credit unearned revenue current liability to reflect that goods still have to be provided for against the cash received subsequently when the company completes the transaction it can be seen that they reflect this amount in the income statement which can be reflected in the following journal entry.
The owner then decides to record the accrued revenue earned on a monthly basis.
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