Is unearned revenue a credit or a debit?
Understand the Problem
The question is asking whether unearned revenue is classified as a credit or a debit in accounting terms. This relates to how such transactions are recorded in financial statements.
Answer
Credit
The final answer is that unearned revenue is a credit.
Answer for screen readers
The final answer is that unearned revenue is a credit.
More Information
Unearned revenue represents a liability for the company as it refers to revenue for services or products that are yet to be delivered.
Tips
A common mistake is to misunderstand unearned revenue as an asset, but it is actually recorded as a liability until the service or product is delivered.
Sources
- What Is Unearned Revenue and How to Account for It - Baremetrics - baremetrics.com
- Unearned revenue definition - AccountingTools - accountingtools.com
- What is unearned revenue and how to calculate it - Paddle - paddle.com
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