A revenue that an entity/ a business has not yet earned. In other words, it refers to all amounts received and recorded as liabilities before the earning cycle has completed (by rendering a service or delivering a product). When an entity does really earn the revenue, it will debit the “unearned revenue account“.
Examples of items that may result in unearned revenues include rent, subscriptions, deposits for future delivery. etc. An example of unearned revenues is a magazine subscription paid for the entire year while issues are printed and delivered on a monthly basis (month to month). Therefore, the balance of unearned revenues relating to subscriptions will decrease over time (as the “unearned revenue account” will be debited month by month.
Unearned revenues are the accounting opposite of prepaid expenses. On the books of a customer who made the advance payment, the corresponding amount will be a prepayment.
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