Accounting for Unearned Rent
ContentHow to calculate unearned revenue (with examples)Unearned RevenueUnearned rent journal entryDeferred revenue vs. unearned revenue Both are balance sheet accounts, so the transaction does not immediately affect the income statement. If it is a monthly publication, as each periodical is delivered, the liability or unearned revenue is reduced by $100 ($1,200 divided by 12 months) while revenue is increased by the same amount. It is a liability because even though a company has received payment from the customer, the money is potentially refundable and thus not yet recognized as revenue. You will only recognize unearned revenue once you deliver the product or service paid for in advance as per accrual accounting principles. Under the cash basis of accounting, the landlord does not have any unearned rent.So $100 will come out…