Unearned Revenue

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Unearned Revenue

Revenue for a company from a project that has not been completed or a product that has not been delivered. A common example of unearned revenue is prepayment for a lease or asset. Unearned revenue is a liability for the company until the project has been completed or the product delivered; at that point, it becomes earned revenue.
References in periodicals archive ?
Therefore, when a company sells a gift card, cash has been received, but goods or services have yet to be provided--the seller records this increase in cash along with a liability for unearned revenue.
When it delivers the digital camera, XYZ immediately recognizes $ 162 of previously unearned revenue from the gift card.
The company will record the entries shown in Exhibit 6 to reverse the entries shown in Exhibit 1, which initially record unearned revenue.
Similarly, the effects of the beginning and ending balances of unearned revenue are opposite upon conversion as well (ending balance subtracted and beginning balance added).
AVMD recognizes all expenses on the date they are incurred regardless of whether they relate to recognized or unearned revenue whereas unearned revenue (which is generated by current expenses) is unable to be recognized in the current period.