Unearned Income Vs Unearned Revenue

In the company s books.

Unearned income vs unearned revenue. While accrued revenue is capital not earned on services already provided unearned revenue is capital already earned on services not yet provided. Unearned revenue is a liability because the revenue is not yet earned and the company owes products or services to the customer. Deferred and unearned revenue are accounting terms that both refer to revenue received by a company for goods or services that haven t been provided yet. The unearned amount is initially recorded in a liability account such as deferred income deferred revenues or cus.

Definition of unearned income unearned income or deferred income is a receipt of money before it has been earned. The nature of unearned revenue proves relatively obvious given the name capital not yet earned through services. It comes in without any required physical activity on your part. When the services are delivered to the customer gradually over time revenue is equally recorded and realized in the income statement.

By contrast unearned revenue represents the opposite situation in which a customer prepays for a good or service. On a company s balance sheet deferred revenue and unearned revenue are the same thing. The nature of accrued revenue proves less immediately evident. Credit income statement now that goods and services have been provided against the amount that has been generated it can now be considered as revenue generated from sales therefore it can be seen that unearned revenue is a temporary account which reflects the amount that is generated from customer payments that are yet to be serviced.

Unearned income is money that you take in passively. Unearned revenue is a liability for companies and individuals whereas unearned income serves as a supplement to normal earned income for companies and individuals. One of the most common types of unearned income is interest income or dividends from an investment. This is also referred to as deferred revenues or customer deposits.

In order to balance the cash that the company receives in such a transaction the. They both refer to an item that initially goes on the books as a liability that is an obligation that the company must fulfill but later becomes an asset or something that increases the net worth of the company.