Prepaid Income Vs Unearned Revenue

Unearned revenue and prepaid expense are the same things but in the context of different people.

Prepaid income vs unearned revenue. Unearned revenue is the money received in advance for the services or products that are still to be delivered to the customer at a future date. And when ready to recognize income write a journal entry credit income revenue account and debit prepaid unearned income account. This is a liability amount which is an obligation over the company. So assume that a landlord receives 1 000 in rent for the month of april on april 1.

The best example of prepaid accounts is a prepaid mobile recharge where you pay in advance whereas unearned account is when a property seller accepts an initial deposit from the buyer in advance. Both unearned revenue and deferred revenue are characterized as revenue or profit for a particular company that supplies goods or services but they are listed as liabilities in the accounting books because the said income or revenue is considered as not yet earned or recognized. If you re depositing this money in and not creating invoice deposit to this account. For the income account field on the product service information screen you would select this prepaid unearned income account.

Unearned revenue is the money received by an individual or a company for services that have yet to be provided or goods that are yet to be delivered. The income due or unearned is income for the same period and not entered into the treasury of the establishment either the expenses of the introduction are expenses for subsequent financial periods such as rents and others. You ve two ways of handling this select one which works best for your business. Create an invoice using this item once to record prepaid deposit and create a 2nd zero invoice when ready to recognize income positive item and clear prepaid unearned income negative item.

Unearned rent is a type of deferred revenue account because the landlord has received income before providing the service. Prepaid vs unearned account prepaid accounts and unearned accounts are very common these days but present challenges to those involved in book keeping. This would count as a liability for the seller as the revenue has yet to be earned because the good or service hasn t been delivered. This is a prepayment from the buyer for goods and services to be supplied at a later date.

That unearned revenue turns into current revenue that is included on the income statement. Prepaid income is earned from revenues for subsequent financial periods which are not.