Unearned revenue is usually included in a deferred revenue account for tax-recording purposes. Unearned revenue is revenue for services not yet rendered or goods that have not been distributed to the customer, according to Business Economics. Examples of unearned revenue include prepayment for airline tickets, transportation vouchers and concert tickets. When the ticket is redeemed or paid-for merchandise is shipped, the monies move from an unearned revenue account to sales.Know More
According to AccountingTools, unearned revenue accounts can be used to estimate the amount of income that a company expects to receive in a certain period. These types of revenue can come from anticipated sales, rental payments made in advance and prepaid insurance. Unearned revenue may also be denoted as prepaid revenue on a company's balance sheet.
AccountingTools notes that unearned revenue accounts are liabilities rather than assets because the company is liable for the amount until the service is redeemed or the product is distributed. For accounting purposes, unearned income is debited from a cash account and credited to the unearned revenue account. Unearned revenue accounts should be reported as liabilities on the balance sheet to prevent the possibility of overstating revenue or income.
Business Economics notes that some prepaid transactions, such as placing a deposit on a rental property, are considered prepayment for potential services and are not classified as unearned income, because the contractual obligations regarding the exchange of money for services is different from a sales transaction.Learn more about Accounting
Revenue reserve refers to profits that publicly owned companies do not distribute to shareholders, according to The Law Dictionary. Instead, companies hold onto the reserve to promote further growth in the business.Full Answer >
Revenue allocation is the distribution or division of total income, or revenue, in a business, corporate or government structure. It involves a complex process that entails how and where to allocate revenues in order to ensure the viability of departments and maintain the operating structure of the organization.Full Answer >
Deferred revenue is a current liability because the revenue is not yet earned even though products or services are due to a customer, according to Investopedia. Examples of deferred revenue are software license fees, maintenance fees and subscriptions owed to software companies on a monthly or yearly basis.Full Answer >
A capital expenditure includes all costs incurred on the acquisition of a fixed asset along with subsequent expenditures that increase the asset's earning capacity, while revenue expenditure only includes costs that are aimed at maintaining fixed assets and not enhancing earning capacity. The distinction between capital expenditure and revenue expenditure is important because only capital expenditures are included in the cost of a fixed asset.Full Answer >