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Question of the Week – Financial Reporting and Analysis

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    • Avatar of AdaptPrepAdaptPrep
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        • Undecided
        31 Dec 2017 at 7:09 am
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        Unearned revenue can be best classified as which type of an account?

        • Asset
        • Liability
        • Income
      • Avatar of AlphaDollAlphaDoll
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          • Undecided
          31 Dec 2017 at 6:53 pm
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          Hmm. Only one with a wrong answer. I have a lot to learn…

        • Avatar of shannondailyshannondaily
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            10 Jan 2018 at 1:22 pm
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            Woo! I got it right. 

          • Avatar of hairyfairyhairyfairy
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              01 Jan 2018 at 5:07 am
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              AlphaDoll said:
              Hmm. Only one with a wrong answer. I have a lot to learn…

              Don’t give up! 🙂

            • Avatar of jak5189jak5189
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                31 Dec 2017 at 9:33 pm
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                Remember revenue is recognized if it is realizable and earned. In this case, the company would receive the cash and, since it did not provide the services or deliver the goods, record an offsetting balance sheet entry, which would be a liability in this scenario. Once the company actually delivers the good or service, it will then reverse that liability and record a revenue. 

              • Avatar of hairyfairyhairyfairy
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                  31 Dec 2017 at 8:01 am
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                  I like the new leaderboards! (Also the fact that I’m *just* on one of them!)

                • Avatar of AdaptPrepAdaptPrep
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                    • Undecided
                    03 Jan 2018 at 7:46 am
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                    The unearned revenue account is created when revenue
                    comes in before the product or service is provided. Because that cash has come
                    in, the company owes a product or service to the customer (and will have to pay
                    back the money if they do not come through). Like any obligation, unearned
                    revenue is a liability.

                  • Avatar of surangasasurangasa
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                      • CFA Charterholder
                      08 Jan 2018 at 5:04 am
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                      Damn, clicked the wrong radio button and pressed vote. Unearned simply means I haven’t earned it yet and therefore it is a liability. 

                    • Avatar of MaverickMaverick
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                        10 Jan 2018 at 4:32 pm
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                        shannondaily said:
                        Woo! I got it right. 

                        Yay! A bit of positive reinforcement on the forums always goes a long way to good self esteem before the exam.

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