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What Is Unearned Revenue? A Definition and Examples for Small Businesses
Here’s an example of a balance sheet. Unearned revenues are payments for future services to be performed or goods to be delivered. Advance customer payments for newspaper subscriptions or extended warranties are unearned revenues at the time of sale. At the end of each accounting period, adjusting entries must be made to recognize the portion of unearned revenues that have been earned during the period. As with Example 1, the payments are recorded only in the balance sheet at first, and thetwo sides of the equation are balanced with respective entries.
Understanding Unearned Revenue
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