Explain why unearned revenue is a liability account.
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Explain why unearned revenue is a liability account.
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Related Book For
College Accounting A Practical Approach
ISBN: 978-0134166698
13th Canadian edition
Authors: Jeffrey Slater, Debra Good
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Unearned revenue is money received by an individual or company for a service or product that has yet to be provided or delivered. It can be thought of as a \"prepayment\" for goods or services that a person or company is expected to supply to the purchaser at a later date. As a result of this prepayment, the seller has a liability equal to the revenue earned until the good or service is delivered. This liability is noted under current liabilities, as it is expected to be settled within a year.
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