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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.
