Unearned revenue is listed under “current liabilities.” It is part of the total current liabilities as well as total liabilities. On a balance sheet, assets must always equal equity plus liabilities.

Is unearned income a current asset?

Unearned revenue is recorded on a company’s balance sheet as a liability. It is treated as a liability because the revenue has still not been earned and represents products or services owed to a customer. Unearned revenue is usually disclosed as a current liability on a company’s balance sheet.

How is unearned revenue treated on a balance sheet?

Unearned income on a company balance sheet is usually treated as a current liability, and is expected to be credited to the income account during the relevant reporting period. However, let’s review the answer in detail. First, one needs to understand what a current liability is. A current liability is the amount of debt owed to creditors …

Where does unearned income go on the income statement?

The unearned amount is initially recorded in a liability account such as Deferred Income, Deferred Revenues, or Customer Deposits. As the amount is earned, the liability account is reduced and the amount earned will be reported on the income statement as revenues. Example #1 of Unearned Income

When does unearned income become a current liability?

Unearned income on a company balance sheet is usually treated as a current liability, and is expected to be credited to the income account during the relevant reporting period. However, let’s review the answer in detail. First, one needs to understand what a current liability is.

Which is the best example of unearned revenue?

It is also known by the name of Unearned Income, Deferred Revenue, and Deferred Income as well. The most basic example of unearned revenue is that of a magazine subscription. When we register for an annual subscription of our favorite magazine, the sales received by the company is unearned.