Sometimes customers pay us before we deliver any goods or services. These payments are Unearned Revenues. Unearned Revenues are also called Deferred Revenues.
Adjusting Journal Entries: Unearned Revenue (Accrual Accounting Method)
Adjusting Entries: Unearned Revenue (Cash Basis to Accrual Method)
In May, the Party Company received $4,000 as a deposit for a party that was occurring in November. In October, the Party Company received a $5,000 deposit for a party occurring in February of the following year. The company recorded both of these payments into the Unearned Revenue account and did not adjust the account after recording the payments. The adjusting entry at December 31 would include: