Unearned Revenue (Sales) on Balance Sheet | Example | Journal Entries

In this video on Unearned Revenue (Sales) on Balance Sheet, here we discuss unearned revenue on balance sheet, how its accounting is done along with practical examples. We also discuss its two types along with its journal entries. 𝐖𝐡𝐚𝐭 𝐢𝐬 𝐔𝐧𝐞𝐚𝐫𝐧𝐞𝐝 𝐑𝐞𝐯𝐞𝐧𝐮𝐞 (𝐒𝐚𝐥𝐞𝐬) 𝐀𝐜𝐜𝐨𝐮𝐧𝐭𝐢𝐧𝐠? ------------------------------------------------------------------------------------ When a company receives cash for the goods or services it will provide in the future, this leads to higher in the firm's cash balance, as the goods or services are to be provided in the future, the company's unearned income is shown as liability in the company's unearned income balance sheet. 𝐓𝐰𝐨 𝐓𝐲𝐩𝐞𝐬 𝐨𝐟 𝐔𝐧𝐞𝐚𝐫𝐧𝐞𝐝 𝐒𝐚𝐥𝐞𝐬 𝐑𝐞𝐯𝐞𝐧𝐮𝐞 𝐑𝐞𝐩𝐨𝐫𝐭𝐢𝐧𝐠 ---------------------------------------------------------------------------------------- #1 - Liability Method Under liability technique, a liability account is established when the company receives deferred income. #2 - Income Method In income technique, when company receives unearned sales income, the entire sum earned is recorded in an income account and adjusted proportionately as products or services are delivered by firm over time as products or services are delivered. 𝐔𝐧𝐞𝐚𝐫𝐧𝐞𝐝 𝐑𝐞𝐯𝐞𝐧𝐮𝐞 (𝐒𝐚𝐥𝐞𝐬) 𝐄𝐱𝐚𝐦𝐩𝐥𝐞 ---------------------------------------------------------------- Assume company ABC pays $13,000 for maintenance and cleaning contract to company ABC for a period of 12 months. How will ABC record this unearned sales revenue on the Balance Sheet. Account Debit Credit Cash $13,000 Deferred Revenue $13,000 To know more about 𝐔𝐧𝐞𝐚𝐫𝐧𝐞𝐝 𝐑𝐞𝐯𝐞𝐧𝐮𝐞 (𝐒𝐚𝐥𝐞𝐬) 𝐨𝐧 𝐁𝐚𝐥𝐚𝐧𝐜𝐞 𝐒𝐡𝐞𝐞𝐭, you can go to this 𝐥𝐢𝐧𝐤 𝐡𝐞𝐫𝐞:- https://www.wallstreetmojo.com/unearn... Subscribe to our channel to get new updated videos. Click the button above to subscribe or click on the link below to subscribe -    / @wallstreetmojo