Unearned Revenues.

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Presentation transcript:

Unearned Revenues

Unearned Revenue

Unearned Revenues? What do you think that is?

Unearned revenue Is income that has been received by a business in advance and will not be earned until a future accounting period

Unearned revenue Can anyone think of an example when this might happen?

$500 commission revenue has been received in advance? Commission Revenue (Revenue) Dr $500 Unearned Revenue (Liability) Cr $500 (Balance-day adjustment)

June 1 June 30

$600 in rent is received in advance? Rent (Revenue) Dr $600 Unearned Revenue (Liability) Cr $600 (Balance-day adjustment) $12,000 in service revenue has been received in advance Service revenue (Revenue) Dr $12,000 Unearned Revenue (Liability) Cr $12,000

Balance day adjustment 30 June 2012 Maintenance revenue of $10,000 was received on 1 June 2012 but you now realise the work has not yet been performed. IT IS 30 JUNE! YOU ARE THE BEST ACCOUNTANT IN THE WORLD. IDENTIFY THE JOURNAL REQUIRED? Dr Maintenance revenue $10,000 Cr Unearned Revenue $10,000 (Unearned maintenance revenue)

Balance Day adjustment as at 30 June 2012 $450 rent was received on 1 May 2012 for May, June and July 2012 rent. How much money relates to the 2012 financial year ??? How much money relates to the 2013 financial year ???

$450 rent has been received for May, June and July ? WHAT IS THE JOURNAL ? Rent Revenue (Revenue) Dr $150 Unearned Revenue (Liability) Cr $150 (Balance-day adjustment)

Balance day adjustment 30 June 2012 $375 has been received as commission revenue for the three months beginning 1 June 2012 Dr Commission revenue 250 Cr Unearned revenue 250 (Unearned commission revenue)

Balance day adjustments so far What were they ? – the first one? Accrued expenses Accrued revenues Unearned revenues

Random balance day adjustment – which one is it? Commission is paid by a supplier to the business at 5%. Our sales for June was $10,000 but no commission has been received? Accrued Revenues (Asset) Dr $500 Commission (Revenue) Cr $500 (Balance-day adjustment)