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How do declines in unearned revenue impact a company's future

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How do declines in unearned revenue impact a company's future earnings outlook?

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Solution Summary

Your tutorial is 300 words and includes a two-year example of the activity in unearned revenues to give you a concrete idea of what some potential causes for a decline in unearned revenues might be.

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First, let's discuss what causes a decline in a company's future. Here are the elements that impact the unearned revenue account (I made up some numbers):

Beginning balance (end of period 2012)..............$3,000
Cash prepayments received from customers.......$5,000
Prepayments earned this period...........................($6,000)
..................................................................................------------
Ending balance, 2013..............................................$2,000

Beginning balance (end of period 2013)...............$2,000
Cash prepayments received from ...

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Carol Sargent, PhD
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  • BSc, University of Virginia
  • MSc, University of Virginia
  • PhD, Georgia State University
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