Unearned Revenue

Unearned revenue is money a business receives before providing the goods or services promised. It’s considered a liability because the company owes the customer something in the future. For example, if a customer pays for a yearly subscription upfront, the company records that payment as unearned revenue until it delivers the service over time. As the company fulfills its obligations, it gradually recognizes that revenue as earned. This accounting ensures that income is matched to the period in which the service or product is actually provided, maintaining accurate financial reporting.