which of the following would be classified as unearned revenue?

B) liability. Unearned revenue is the amount received for those product or services which product or service still not received by customer, therefore it is liability untill service or goods not deliver to customer. Multiple Choice . Terms An Asset Account. Which of the following assets would be classified as current assets on the balance sheet? Option -2 , Liability: Unearned revenue is advance received for future sale of goods or services. Unearned revenue account is classified as current liability as it is the revenue not yet earned by business. - Owner’s equity ? Unearned revenue is based on accrual accounting in which the revenue is recognized only when the products or services are delivered to the customer no even if the payment for those services is received in advance. Why is deferred revenue classified as a liability? Any time someone gives money to another person, wins a prize pool in a contest or lottery, inherits money from a deceased relative, or receives alimony or workers, it is considered unearned revenue. Payment received before a good is sold or a service is provided. If the liability method is used, the entry would be:Take note that the amount has not yet been earned, thus it is proper to record it as a liability. LIABILITY SINCE INCOME IS NOT EARNED YET. following would not result in unearned Privacy Unearned Revenue … After each monthpasses, the unearned revenue account is reduced by $1,500, and the revenue isincreased by the same amount to maintain the balance and recognize the earnedrevenue. Register now Unearned revenue is classified as a liability (credit) as the service still needs to be provided to the customer. One example of unearned revenues would be prepayments on a long-term contract. Cash received in advance for goods or services to be delivered later; considered to be a liability until the revenue is earned. A)Unearned revenue B)Mandatory redeemable preferred stock C)The currently maturing portion of long-term debt D)Accrued salaries payable to management. It is that income which is received but not yet earned, In other words you got paid for a service that you have not yet provided or got paid for goods that are not yet sold. Under the liability method, a liability account is recorded when the amount is collected. It is a liability until the company \"earns\" it by delivering its obligations. Unearned revenues are classified as liabilities in the current liabilities section of the balance sheet. The following unearned revenue journal entry example provides an understanding of the most common type of situations where such a Journal Entry account for and how one can record the same as there are many situations where the Journal Entry for Unearned Revenue pass, it is not possible to provide all the types of examples. Unearned Revenue is the advance payment made by the customer for  service or goods to be provided in near future. During Revenue Generation. As a result the company has the cash, but also has the obligation/liability to perform the service, deliver the product, or return the cash. Unearned Revenue Is Classified as. Unearned revenue can be thought of as a "pre-payment" for goods or services which a person or company is expected to produce to the purchaser. B. Unearned revenue is listed on the business's balance sheet as a current liability, not a contra asset. (d) Inventory, goodwill, unearned revenue. , Confidential Company, Answer added by suleiman bushnaq, Accountant , Gulf Agency Company, Answer added by Nagoorammal Abdul Rahman, Finance Manager , Vox Spectrum Limited, Why the balance sheet equation i.e. 2) Liability 6) Unearned Revenue Is Classified As A. Unearned Revenue Recognition. Which of the following would NOT be classified as a current liability on a classified balance sheet? Answer: a) Credit, liability. entry is not made for an accrued expense, Answers Question 6 The correct answer = Option d: Unearned Revenue is classified as a liability account. Unearned revenue recognition will happen as soon as the service is provided. The package is for three month’s worth of walks. Example #1. A 2 yr. premium paid on a fire insurance policy. A company shows these on the because the obligation is typically fulfilled within … None of theses answers b. The required adjusting entry would be to debit the '\ccounts receivable (Unearned revenue/ Accounts receivable/ Cash/ Service revenue) account and credit (debiVcredit) the Service revenue (Unearned Deferred or unearned revenue is an advance payment made by a customer for a product or service that has not yet been rendered (delivered). a. An example is rental income received in advance. or log in "assets = liabilities + owner's equity" is known as accounting equation despite the fact that it includes only. a. 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: Debit – Unearned Revenue (b) Cash equivalents, inventory, prepaid expenses. Explanation: A liability is an obligation to pay a sum amount of money or services to other party which includes salaries payable and unearned revenue. Unearned revenue is a liability that arises from current sales but for which some services or products are owed to customers in the future. Answer 137: c.unearned rent revenue. The most basic example of unearned revenue is that of a magazine subscription. The unearned revenue account is usually classified as a current liability on the balance sheet. d. Accrued salaries payable to management. Sale of tickets to sport events 2.) Unearned revenue may arise from the following business activies: 1.) - A 3. When we close our books these income is not actually given by the instrument provider. If a company were not to deal with unearned revenue in this manner, and instead recognize it all at once, revenues and profits would initially be overstated, and then understated for the additional periods during which the revenues and profits should have been recognized. 7) Which of the Inventory b. - Land $1,000,000 What Is an Unearned Revenue Example? Which of the following equations properly represents a derivation of the fundamental accounting equation? This means a small business must record its unearned fees as revenue in portions as it earns the revenue, not when it receives the cash. It comes about when a company has received cash in advance of earning it. It is a very common economic transaction. In the adjusting entry, the unearned revenue account will be debited for $250, which will decrease it, and the credit to sales revenue account for the same amount will increase earned revenue and record the income. Unearned revenue is a phenomenon in accrual basis accounting when a business has received payment for goods or services that it has not yet rendered to its customers. and when you have earned it, you ll make the entry & Less common forms of unearned revenue include gifts, prizes, inheritances, and other unearned income. C) a contra-revenue account. Increase in an expense and decrease in an asset. - B 2. Normal balances are credits b. - Debt $0 tenants, c. Sale of season tickets to football B) a revenue account. Some common examples of unearned income are service contracts like housekeeping, insurance contracts, rent agreements, appliance services like refrigerator repair, tickets sold for events, etc. For unearned revenue: debit the unearned revenue account and credit the revenue account (to record revenue earned). Unearned revenue is classified as a current liability on the balance sheet until it is recognized as earned during the accounting cycle. Unearned Rent Revenue represents rental payments received in advance that are applicable for future periods. Only when the revenue is recorded in the balance sheet, this transaction isthen also reflected in the income statement. Generally, unearned revenues are classified as short-term liabilities Current Liabilities Current liabilities are financial obligations of a business entity that are due and payable within a year. b. QN=106 An asset is considered to be … but we can book these as an income on a pro-rata basis into the books for the period falling within our accounting period. The following calculations have been made for Coos Company: Growth Rate Net sales 10.5% Total accounts receivable 21.3% Allowance for doubtful accounts 2.6% Current Year Prior Year Allowance for doubtful accounts as a percentage of total accounts receivable 3.8% 5.4% a. Analyze the accounts receivable and allowance for doubtful accounts. Sale of subcriptions to magazaines magazine subscriptions. (c) Accounts receivable; prepaid expenses; property, plant, and equipment. So it comes under CURRENT LIABILITIES The unearned revenue account is usually classified as a current liability on the balance sheet. Remember: just because that money is in your bank account doesn’t mean your client won’t ask you for a refund in the future. Unearned revenue is recorded as a debit to Cash account and credit to Unearned Revenue account. As a result of this prepayment, the seller now has a liability equal to the revenue earned until deliver of the good or service. The common accounts used are: Unearned Revenue, Deferred Income, Advances from Customers, etc. Unearned revenue is reported as a current liability because it is an obligation to the customer to repay by providing services or goods. A fellow student makes the following statement: “You can easily tell whether a company is using the cash or accrual basis of accounting. Terms of Use - Explanation: Unearned Revenue account represents cash amounts received in advance wherein the related goods or services are not yet performed and delivered. I have responded for accrued income in one of the revenue recongnistion question. It is revenue received but not earned yet. (a) Cash, accounts payable, deferred income taxes. D) a liability account. Related questions. Unearned revenue is usually disclosed as a current liability on a company’s balance sheet. Unearned revenue is great for a small business’s cash flow as the business now has the cash required to pay for any expenses related to the project in the future, according to Accounting Tools. The initial transaction relating to export can be classified as an “agreement to sell”, which is a supply and hence tax invoice needs to be issued under GST law, but at this stage revenue cannot be recognized and hence treated as unearned revenue. 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