Question

Explain what unearned revenues are by selecting the statements below which are correct?

1) Unearned revenues are revenues that have been earned but not yet received.
2) Unearned revenues are liabilities that have been incurred but not yet paid.
3) Unearned revenues are revenues that have been received but not yet earned.
4) Unearned revenues are assets that have been acquired but not yet used.

Answer 1

Unearned revenues are revenues that have been received but not yet earned, such as when a company receives payment in advance for goods or services.

Step-by-step explanation:

Unearned revenues are revenues that have been received but not yet earned.

This means that a company has received payment from its customers for goods or services that it has not yet provided.

For example, if a customer pays in advance for a magazine subscription, the magazine company will record the payment as unearned revenue until they deliver the magazines.