Sometimes customers pay us before we deliver any goods or services. These payments are Unearned Revenues. Unearned Revenues are also called Deferred Revenues.

Concept #1: Adjusting Journal Entries: Unearned Revenue (Accrual Accounting Method)

Concept #2: Adjusting Entries: Unearned Revenue (Cash Basis to Accrual Method)

Practice: In May, the Party Company received $4,000 as a deposit for a party that was occurring in November. In October, the Party Company received a $5,000 deposit for a party occurring in February of the following year. The company recorded both of these payments into the Unearned Revenue account and did not adjust the account after recording the payments. The adjusting entry at December 31 would include:

Additional Problems
On September 1, 20X1, Finally 18 Magazine sold a total of 600 one-year subscriptions at a price of $81 each. The accountant credited the entire amount to Unearned Revenue. When preparing the financial statements, what would be the appropriate adjusting entry on December 31, 20X1? a) Debit Unearned Revenue $48,600; Credit Subscription Revenue $16,200; Credit Prepaid Subscriptions $32,400 b) Debit Unearned Revenue $16,200; Credit Subscription Revenue $16,200 c) Debit Unearned Revenue $16,200; Credit Subscription Payable $16,200 d) Debit Unearned Revenue $32,400; Credit Subscription Revenue $32,400
Sunbrella Insurance Company collected premiums throughout the year from its customers totaling $18,000. The adjusted balance in its Unearned Premiums account increased from $6,000 to $8,000 during the year. What was Sunbrella's revenues from insurance premiums for the current year? a) $10,000 b) $16,000 c) $18,000 d) $20,000
Deferred revenues of $24,000 were received and properly recorded and entered in the ledger of the company. At the end of the accounting period, one-fourth of the deferred revenue had been earned, but unrecorded. The adjusting entry will require a: A) a debit to Unearned Revenues and a credit to Revenues for $6,000. B) a debit to Unearned Revenues and a credit to Cash for $6,000. C) a debit to Unearned Revenues and a credit to Accounts Payable for $6,000. D) a debit to Cash and credit to Revenues for $6,000.
The adjusting entry required when amounts previously recorded as unearned revenues are earned includes: A) A debit to a liability. B) A debit to an asset. C) A credit to a liability. D) A credit to an asset.
A landlord should report rent collected in advance as a debit to Cash and a credit to: a) A liability. b) An asset other than Cash. c) A revenue. d) An owners' equity.
The account Unearned Management Fees would appear in the balance sheet as a(n): a. Asset. b. Liability. c. Revenue. d. Expense.
On 12/1/12, ABC Company receives $1,200 in advance for an annual contract to provide pest control services in the future over the next 12 months. Revenue will be earned equally each month. As of 12/31/12 ABC Company: a. Would have an $1,100 liability b. Would have a $1,100 asset c. Would have $100 expense d. Would have $1,100 revenue 
Unearned Revenue is classified as which type of account? A) asset B) liability C) stockholders' equity D) revenue
Rivard Company records $50,000 in the unearned revenue account during its first year of operations. The ending balance of unearned revenue is determined to be $22,500. The adjusting entry involves a: a) Debit to service revenue for $22,500 b) Debit to unearned revenue for $22,500 c) Credit to service revenue for $22,500 d) Credit to service revenue for $27,500 e) Credit to unearned revenue for $27,500
Legaleese Inc. received $2,000 cash for legal services to be rendered in the future. The full amount was credited to the liability account Unearned Legal Fees. If the legal services have been rendered at the end of the accounting period and no adjusting entry is made, this would cause a. expenses to be overstated. b. net income to be overstated. c. liabilities to be understated. d. revenues to be understated.
Failure to record the adjustment to recognize revenue initially recorded as unearned revenue: a) Understates liabilities b) Understates revenue c) Overstates expenses d) Understates assets e) Overstates equity
What type of an account is Unearned Revenue? a. Asset b. Liability c. Revenue d. Expense
An unearned revenue is: a) Cash received from a customer after the service is performed b) Cash received from a customer before the service is performed c) Service performed for a customer before the payment is received d) Service performed for a customer before the customer is billed
The Booker Theater offered books of theater tickets to its patrons at $30 per book. Each book contained a certain number of tickets to future performances. During the current period 1,000 books were sold for $30,000 and this amount was credited to Unearned Ticket Revenue. At the end of the period it was determined that $10,000 worth of book tickets had been used by customers attending performances. The appropriate adjusting entry at the end of the period would be: a. Debit Ticket Revenue $20,000 and credit Unearned Ticket Revenue $20,000 b. Debit Ticket Revenue $10,000 and credit Unearned Ticket Revenue $10,000. c. Debit Unearned Ticket Revenue $20,000 and credit Ticket Revenue $20,000. d. Debit Unearned Ticket Revenue $10,000 and credit Ticket Revenue $10,000.