Wednesday, September 17, 2014

Unearned Revenues

Unearned Revenues

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.


Accounting records that do not include adjusting entries to show the earning of previously unearned revenues overstate total liabilities and understate total revenues and net income.

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