Failure to record the earned portion of unearned revenue would result in which of the following?
A)Net income being understated
B)No effect on total liabilities
C)Stockholders' equity being overstated
D)Total assets being understated

Question

Quizplus · Accepted Answer

Failure to record the earned portion of unearned revenue would result in net income being understated. Unearned revenue is a liability account used to record advance payment for goods and services that have not yet been delivered or rendered. When the goods or services are delivered or rendered, the unearned revenue is recognized as revenue. If the earned portion of unearned revenue is not recorded, revenue will be understated, and net income will also be understated. This error will affect the accuracy of the financial statements.

Failure to Record the Earned Portion of Unearned Revenue Would