4RQ
Question
How do unearned revenues arise?
Step-by-Step Solution
Verified Answer
A company may consider revenue earned only when it has substantially delivered a product or performed a service.
1Step 1: Meaning of Unearned Revenue
When a company or an individual receives the amount in advance but will deliver the product or the services in the future, this particular advance received amount is known as the unearned revenue.
2Step 2: Recognition of unearned revenue
Unearned avenue arises when the business recieves the amont in advance, and it cannot recognize revenue until it delivers the commodity or the service to the consumer who paid for it; unearned income is a crucial accounting term.
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