Unearned Revenue
Performance Obligations
Unearned revenue results when customers pay before goods or services are provided. Until the related performance obligation is satisfied, the company reports the amount received as a liability rather than revenue.
- Advance subscription payments.
- Gift cards.
- Customer deposits.
- Advance ticket sales.
- Prepaid service contracts.
Cash received is not revenue until the promised goods or services have been delivered.
Summary
Unearned revenue represents obligations to deliver future goods or services rather than earned income.