Understanding Unearned Revnue
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What types of industries have unearned revenue? Why is unearned revenue considered a liability? When is the unearned revenue recognized in the financial statements?
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Solution Summary
This solution explores the concept of unearned revenue and its implications as a liability in financial statements. 197 words with reference.
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Revenue recognition: Revenue is recognized when both of the following conditions are met:
a. Revenue is earned.
b. Revenue is realized or realizable.
Expense recognition: Expense is recognized in the period in which related revenue is recognized (Matching Principle). Revenue is earned when products are delivered or services are provided.
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