Unearned revenue
Financial Accounting glossary · The Accounting Cycle & Financial Statements
Definition
See deferred revenue.
Unearned revenue in plain English
Unearned revenue is money a business has already collected but hasn't actually earned yet, because it still owes the customer the product or service. Until it delivers, that cash counts as a liability — a promise it must fulfill — not as income. Imagine a gym that charges you $600 up front for a year of membership: on day one it has your cash, but it hasn't given you the year of workouts yet, so it can only count the revenue little by little each month as you use it. "Unearned revenue" and "deferred revenue" are just two names for this exact same thing.
Related Financial Accounting terms
Financial Accounting practice questions · Financial Accounting flashcards · Financial Accounting study guide