Unearned Revenue Vs Accounts Receivable

In financial accounting unearned revenue refers to amounts received prior to being earned.

Unearned revenue vs accounts receivable. It is like being prepaid for something. Receives 24 000 on december 31 2012 for a one year service agreement covering january 1 through december 31 2013 the entire 24 000 is unearned as of december 31 2012. In the company s books deferred unearned revenue henceforth referred to solely as deferred revenue is classified as revenue profit but is listed as a liability on the balance sheet until the. Deferred revenue unearned income is revenue received in advance for the goods to be delivered or services to be rendered.

Accounts receivable is the amount owed to a seller by a customer as such it is an asset since it is convertible to cash on a future date accounts receivable is listed as a current asset in the balance sheet since it is usually convertible into cash in less than one year. In this case one asset accounts receivable increases representing money owed by the customer this increase is balanced by the increase in liabilities unearned revenue account. This interim difference between revenue and invoice account balances is bridged using unbilled receivables ubr and unearned revenue uer accounts. Account receivable ar is sales of goods or services rendered on account.

Accounts receivable often called ar is a balance sheet asset that is credited when when revenue has been earned but not yet received. As a company receives money from clients it debits the ar. Unearned revenue uer unearned revenue also termed as deferred revenue or uer signifies money received for the goods or services which are yet to be delivered. Deferred revenue is money you have received for good or services that you have not yet sold or performed.

Its income while in balance sheet its current assets. If the receivable amount only converts to cash in more than one year it is instead recorded as a long term asset on the. An example would be a magazine company receiving payments for a year subscription if its magazine. For example if abc service co.

Unearned revenue vs accounts payable unearned revenue as far as unearned revenue is concerned it can be seen that it is mainly defined as the amount that has been collected from the customer but in return for the amount that has been collected subsequent payment has not been collected.