Is unearned revenue a short-term debt?
Jackson Reed
Updated on January 04, 2026
If the company failed to deliver, it would still owe that money to the customer so it cannot be recorded as revenue just yet. After delivery, the payment switches from liability to revenue. Unearned revenues are usually considered to be short-term liabilities because obligations are fulfilled within a year.
Why are unearned revenues recorded as liabilities?
And so, unearned revenue should not be included as income yet; rather, it is recorded as a liability. This liability represents an obligation of the company to render services or deliver goods in the future. It will be recognized as income only when the goods or services have been delivered or rendered.
What account is unearned revenue?
liability
Unearned revenue is an account in financial accounting. It’s considered a liability, or an amount a business owes. It’s categorized as a current liability on a business’s balance sheet, a common financial statement in accounting.
Where does unearned revenue go on a balance sheet?
Where Does Unearned Revenue Go? Unearned revenue is included on the balance sheet. Because it is money you possess but have not yet earned, it’s considered a liability and is included in the current liability section of the balance sheet.
Why isnt unearned revenue an asset?
Unearned revenue is financial statements: This liability is recognized as an obligation for the company because they owe to their customers in terms of products or services. Because of this nature of prepayments for the services to deliver, unearned revenue is not recognized as revenue and is recorded as a liability.
Is unearned revenue a liability or 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.
Is unearned revenue a temporary account?
Therefore, it can be seen that Unearned Revenue is a temporary account, which reflects the amount that is generated from customer payments that are yet to be serviced.
What is unearned revenue journal entry?
Unearned revenue should be entered into your journal as a credit to the unearned revenue account, and a debit to the cash account. This journal entry illustrates that the business has received cash for a service, but it has been earned on credit, a prepayment for future goods or services rendered.
What is the journal entry of unearned income?
Unearned revenue is a liability for the recipient of the payment, so the initial entry is a debit to the cash account and a credit to the unearned revenue account. The unearned revenue account is usually classified as a current liability on the balance sheet.
