Is a layaway down payment recorded as an unearned revenue
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Is a down payment on a layaway recorded on the books as an unearned revenue (liability)? Or is the entire cost of the item recorded as an unearned revenue? I would think it would be the whole item cost. Then if the customer does not come back to buy the item, the whole amount of the item is redistributed back into assets?
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Solution Summary
The solution explains several possible treatments for the down payment on a layaway sale. Journal entries are given for two scenarios.
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It depends on how the transaction was written. If there is a sales invoice for the entire amount of the sale, then the whole sale is recorded as unearned revenue less the down payment.
If the customer has a sales invoice AND took possession of the items, then you have an accounts receivable or note ...
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