unearned revenue

(noun)

money received for goods or services which have not yet been delivered

Related Terms

Examples of unearned revenue in the following topics:

  • Unearned and Deferred Revenues

    • If the deferred item relates to revenue (cash has been received), it is carried as a liability.
    • An example of a deferred revenue is the monies received for a 12-month magazine subscription.
    • Since the seller has received full payment for all 12 issues that will be delivered over the course of the year, the payment is recorded as unearned or deferred revenue in the current liability section of the balance sheet.
    • A deferred revenue item involves cash received before the earnings process is complete.
    • Explain the purpose of classifying transactions as either deferred or unearned revenue

  • Journalizing

    • You receive cash totaling $800 for classes.Cash 800 Revenue 8002.
    • The remainder is for 2-month passes allowing unlimited classes in August and September.Cash 1,500 Revenue 1,250 Unearned revenue 2502.
    • You sell inventory costing $150 for a $225.Cash 225 Revenue 225Cost of goods sold 150 Inventory 150(these can be combined into a single entry if you choose.)6.
    • The class cost $15.Revenue 15 Cash 15or Refund expense 15 Cash 158.

  • Liabilities

    • They usually include payables such as wages, accounts, taxes, and accounts payables, unearned revenue when adjusting entries, portions of long-term bonds to be paid this year, short-term obligations (e.g., from purchase of equipment).

  • Recording Transactions

    • The remainder is for 2-month passes allowing unlimited classes in August and September.Cash 1,500, Unearned Revenue 250, Service Revenue 1,250 Assets(+1,500)=Liability(+250)+Equity(+1,250)2.
    • You sell inventory costing $150 for a revenue of $225.a.
    • Cash 225, Sales Revenue 225; Assets(+)=Equity(+)b.
    • The class cost $15.Cash -15, Service Revenue -15; Assets(-)=Equity(-)8.
    • You sell inventory costing $150 for a revenue of $225.

  • Overview of Lease Accounting

    • Under an operating lease, the lessor records rent revenue (credit) and a corresponding debit to either cash/rent receivable.
    • With each payment, cash is debited, the receivable is credited, and unearned (interest) income is credited.
    • Security Deposits: Nonrefundable security deposits:deferred by the lessor as unearned revenue; capitalized by the lessee as a prepaid rent expense until the lessor considers the deposit earned.

  • Pro Forma Balance Sheet

    • The pro forma models the anticipated results of the transaction, with particular emphasis on the projected cash flows, net revenues and (for taxable entities) taxes.
    • Unearned revenue for services paid for by customers, but not yet provided

  • How Business Activities Affect the Balance Sheet

    • Unearned revenue for services paid for by customers but not yet provided

  • Balance Sheets

    • Unearned revenue for services paid for by customers but not yet provided.

  • Recognition of Revenue After Delivery

    • In this situation, revenue is not recognized at point of sale or delivery.
    • There are three methods that recognize revenue after delivery has taken place: .
    • The unearned income is deferred (recorded as a liability) and then recognized to income when cash is collected.
    • The seller records the cash deposit as a deferred revenue, which is reported as a liability on the balance sheet until the revenue is earned.
    • As the delivery of the magazines take place, a portion of revenue is recognized, and the deferred liability account is reduced for the amount of the revenue.

  • Budget Cuts

    • Citing the economic theories of Arthur Laffer, Reagan promoted the proposed tax cuts as potentially stimulating the economy enough to expand the tax base, offsetting the revenue loss due to reduced rates of taxation, a theory that entered political discussion as the Laffer curve.
    • Additional tax increases passed by Congress and signed by Reagan, ensured that tax revenues over his two terms were 18.2% of GDP as compared to 18.1% over the 40 year period 1970-2010.
    • The net effect of all Reagan-era tax bills was a 1% decrease in government revenues when compared to Treasury Department revenue estimates from the Administration's first post-enactment January budgets.
    • Along with Reagan's 1981 cut in the top regular tax rate on unearned income, he reduced the maximum capital gains rate to only 20% – its lowest level since the Hoover administration.