Deferred Revenue (Unearned Revenue) Example

Example 3

On December 29, 20x1, Entity C received $8,000 in cash for the service to be provided on January 3, 20x2. Prepare journal entries on the following dates:

December 29, 20x1

Cash

8,000

   Unearned revenue

8,000

[Note]

$8,000 cash received on December 29 is unearned revenue, since service has not been provided yet. Revenue will be recognized when service is provided in January.

January 3, 20x2

Unearned revenue

8,000

   Service revenue

8,000