Exercise 4 9 Adjusting entry for unearned revenue Exercise 4. Adjusting entry for unearned revenue

At the end of the six months, all unearned revenue has converted into revenue, since all money received accounts for the six mystery boxes that have been paid for. Unearned revenue and deferred revenue are the same things, as are deferred income and unpaid income. These are are all various ways of referring to unearned revenue in accounting. Which of the following statements is false? IFRS requires that revenues and costs must be capable of being measured reliably. Per accrual accounting reporting standards, revenue must be recognized in the period in which it has been “earned”, rather than when the cash payment was received.

The general ledger is an https://bookkeeping-reviews.com/ing record that is organized by account, such as cash or rent income. The type of account under which you would classify rental income in the general ledger depends on when your small business collects rent from your tenant.

Financial & Managerial Accounting

The company classifies the revenue as a short-term liability, meaning it expects the amount to be paid over one year for services to be provided over the same period. This is also a violation of the matching principle, since revenues are being recognized at once, while related expenses are not being recognized until later periods. A company pays $2,400 for rent one year in advance. Determine the amount of revenue or expense, if any, that is recorded under accrual-basis accounting and under cash-basis accounting.

DebitCreditUnearned Revenue$10,000–Revenue–$10,000The unearned revenue account declines, with the coinciding entry consisting of the increase in revenue. DebitCreditCash$10,000–Unearned Revenue–$10,000We see that the cash account increases, but the unearned revenue liability account also increases.

Unearned Revenue Journal Entries

This is because the business has an obligation to deliver the goods or services to the customer in the future. Once the goods or services have been delivered or performed, the liability is extinguished and the revenue is recognized.