Scribd Logo
Upload

Welcome to Scribd!

  • 04 Adjusting Journal Entries (Step 5), Part 5

    Uploaded by

    Stephanie Jones
    4 views2 pages
    Deferred (unearned) revenues occur when a company receives cash before revenue is earned under accrual accounting, such as for subscriptions. When recording deferred revenues, cash is debited but revenue is not credited; instead, a liability account called unearned revenue is credited. Over time, as revenues are earned, the liability account is debited and the revenue account is credited. If adjusting journal entries are not made, liabilities will be overstated and revenues will be understated.

    Original Description:

    Copyright

    © © All Rights Reserved

    Available Formats

    PDF, TXT or read online from Scribd

    Did you find this document useful?

    Is this content inappropriate?

    Report this Document
    Deferred (unearned) revenues occur when a company receives cash before revenue is earned under accrual accounting, such as for subscriptions. When recording deferred revenues, cash is debited but revenue is not credited; instead, a liability account called unearned revenue is credited. Over time, as revenues are earned, the liability account is debited and the revenue account is credited. If adjusting journal entries are not made, liabilities will be overstated and revenues will be understated.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Flag for inappropriate content
    4 views2 pages

    04 Adjusting Journal Entries (Step 5), Part 5

    Uploaded by

    Stephanie Jones
    Deferred (unearned) revenues occur when a company receives cash before revenue is earned under accrual accounting, such as for subscriptions. When recording deferred revenues, cash is debited but revenue is not credited; instead, a liability account called unearned revenue is credited. Over time, as revenues are earned, the liability account is debited and the revenue account is credited. If adjusting journal entries are not made, liabilities will be overstated and revenues will be understated.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Flag for inappropriate content
    of 2

    10/10/23, 3:31 PM Adjusting Journal Entries (Step 5), Part 5

    Deferred (Unearned) Revenues

    Occurs when a company receives cash before revenue is


    earned and recognized on the financial statements under
    accrual basis accounting
    E.g., subscriptions, airlines, trains

    Recording Deferred Revenues

    Cash debited
    Revenue credited?
    No, a liability account (unearned revenue) credited
    instead
    Liability a future obligation, not a future cash payment

    Deferred Revenues and the AJE

    As time passes, revenues earned


    Liability account debited and revenue account credited
    If AJE not done?
    Liabilities overstated
    Revenues understated

    https://async-content-player.prod.oc.2u.com/media-player?auth_token=eyJhbGciOiJIUzI1NiIsInR5cCI6IkpXVCJ9.eyJ0b29sQ29uc3VtZXJJZCI6IjJhM… 1/2
    10/10/23, 3:31 PM Adjusting Journal Entries (Step 5), Part 5

    https://async-content-player.prod.oc.2u.com/media-player?auth_token=eyJhbGciOiJIUzI1NiIsInR5cCI6IkpXVCJ9.eyJ0b29sQ29uc3VtZXJJZCI6IjJhM… 2/2

    You might also like