Adjusting Entries – Part II Unearned Revenue. Receipt of cash that is recorded as a liability because the revenue has not been earned. Adjusting Entries.

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Adjusting the Accounts

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Presentation transcript:

Adjusting Entries – Part II Unearned Revenue

Receipt of cash that is recorded as a liability because the revenue has not been earned. Adjusting Entries for “Unearned Revenues” rent airline tickets school tuition Cash Receipt Revenue Recorded BEFORE magazine subscriptions customer deposits Unearned revenues often occur in regard to: SO 5 Prepare adjusting entries for deferrals.

Unearned Revenues Company makes an adjusting entry to record the revenue that has been earned and to show the liability that remains. The adjusting entry for unearned revenues results in a decrease (a debit) to a liability account and an increase (a credit) to a revenue account. SO 5 Prepare adjusting entries for deferrals. Adjusting Entries for “Unearned Revenues”

SO 5 Prepare adjusting entries for deferrals. Adjusting entries for unearned revenues Decrease (a debit) to a liability account and Increase (a credit) to a revenue account. Adjusting Entries for “Unearned Revenues” Illustration 3-10

Adjusting Entries for “Unearned Revenues” Illustration: Pioneer Advertising Agency received $1,200 on October 2 from R. Knox for advertising services expected to be completed by December 31. Unearned Service Revenue shows a balance of $1,200 in the October 31 trial balance. Analysis reveals that the company earned $400 of those fees in October. Service revenue400 Unearned service revenue400Oct. 31 Illustration 3-11 SO 5 Prepare adjusting entries for deferrals.

Summary Adjusting Entries for “Unearned Revenues” Illustration 3-12 SO 5 Prepare adjusting entries for deferrals.