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Chapter 11: 4RQ (page 603)

How do unearned revenues arise?

Short Answer

Expert verified

A company may consider revenue earned only when it has substantially delivered a product or performed a service.

Step by step solution

01

Meaning of Unearned Revenue

When a company or an individual receives the amount in advance but will deliver the product or the services in the future, this particular advance received amount is known as the unearned revenue.

02

Recognition of unearned revenue

Unearned avenue arises when the business recieves the amont in advance, and it cannot recognize revenue until it delivers the commodity or the service to the consumer who paid for it; unearned income is a crucial accounting term.

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Most popular questions from this chapter

Theodore Simpson works for Blair Company all year and earns a monthly salary of \(4,000. There is no overtime pay.

Based on Theodore鈥檚 W-4, Blair withholds income taxes at 15% of his gross pay. As of July 31, Theodore had \)28,000 ofcumulative earnings.

Journalize the accrual of salary expense for Blair Company related to the employment of Theodore Simpson for the month ofAugust.

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Accounting treatment for contigencies

Analyze the following independent situations.

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Determine how each contingency should be treated.

Sell-Soft is the defendant in numerous lawsuits claiming unfair trade practices. SellSoft has strong incentives not to disclose these contingent liabilities. However, GAAP requires that companies report their contingent liabilities.

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