Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

3. Accrual Accounting Concepts

Adjusting Entries: Unearned Revenue

Financial Accounting

3. Accrual Accounting Concepts

Adjusting Entries: Unearned Revenue

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Multiple Choice

Unearned revenue is reported in the financial statements as:

an expense on the income statement

an asset on the balance sheet

a liability on the balance sheet

revenue on the income statement

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Understand the concept of unearned revenue: Unearned revenue refers to money received by a company for goods or services that have not yet been delivered or performed. It represents an obligation to provide goods or services in the future.

Identify the classification of unearned revenue: Since unearned revenue represents an obligation, it is classified as a liability. This is because the company owes the customer either the goods/services or a refund if the obligation is not fulfilled.

Determine where unearned revenue is reported: Unearned revenue is reported on the balance sheet under the liabilities section. It is not considered an asset because it does not provide future economic benefits, nor is it an expense or revenue until the goods/services are delivered.

Understand the impact on the income statement: Unearned revenue does not appear on the income statement until the company fulfills its obligation by delivering goods or services. At that point, the revenue is recognized and reported on the income statement.

Review the options provided in the problem: Based on the explanation above, unearned revenue is correctly classified as a liability on the balance sheet. The other options (expense, asset, or revenue) are incorrect classifications for unearned revenue.