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 asset on the balance sheet

A liability on the balance sheet

Revenue on the income statement

Owner's equity on the balance sheet

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Verified step by step guidance

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 delivery of goods or the performance of services.

Determine where liabilities are reported: Liabilities are reported on the balance sheet, which is one of the primary financial statements used to show a company's financial position at a specific point in time.

Clarify why unearned revenue is not an asset: Assets represent resources owned by the company that provide future economic benefits. Unearned revenue does not meet this definition because it is an obligation rather than a resource.

Conclude that unearned revenue is reported as a liability on the balance sheet: Based on the above reasoning, unearned revenue is correctly classified as a liability and appears on the balance sheet under the liabilities section.