Lesson: Unearned Revenue

In this lesson, Nick Palazzolo, CPA, breaks down the concept of unearned revenue—a critical piece of accrual-based accounting that can sometimes trip up even seasoned professionals. He illustrates how cash received before providing goods or services creates a liability on the books, and takes you through the journal entries that reflect this balance. With a focus on the debits and credits associated with receiving cash and fulfilling service obligations, Nick ensures that the principles behind recognizing unearned revenues become clear. He also provides insights on adjusting these entries when services are partially or fully conducted, demystifying the process of converting liabilities to earned revenues.