Unearned Revenue Journal Entry
The accounting entry to record advance customer payments, debiting cash and crediting unearned revenue until the obligations are fulfilled and revenue is recognized.
Unearned Revenue Journal Entry
The accounting entry to record advance payments from customers before the related goods or services are provided, debiting cash and crediting unearned revenue (a liability).
For example, when a fitness center collects $1,200 for an annual membership in advance, it would record a debit to cash and a credit to unearned revenue for $1,200, then systematically recognize $100 of revenue each month as services are provided.
The initial journal entry increases cash and creates a liability representing the obligation to provide future goods or services. As performance occurs over time, periodic adjusting entries transfer portions from the liability to revenue accounts. This process ensures proper matching of revenue recognition with service delivery periods.