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Unearned Income/Revenue

All incomes or revenues which are received in advance but not earned during the year are treated as unearned revenue. There may be times when a certain income is received in the current year but the whole amount of it does not belong to the current year.

Adjusting Entries

 

 Revenue Account Dr.
  Revenue received in advance Account  
(For revenue received in advance)  

Accounting Treatment

Unearned incomes/revenues are not the actual income for that particular year and thus deducted from that particular revenue account in the Profit and Loss Account.
Unearned incomes/revenues are treated as liability for the business and thus appear under the Current Liabilities in the Balance Sheet.


Note: If unearned income/revenue appears inside the Trial balance then it will ONLY appear under the Liabilities in the Balance Sheet.

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