Reporting revenues on the income statement that were previously reported as unearned revenues on the balance sheet results in a decrease in liabilities and an increase in net income,retained earnings,and stockholders' equity.

Question

Quizplus · Accepted Answer

When revenues that were previously reported as unearned on the balance sheet are now recognized on the income statement, they are no longer considered a liability because the company has performed the services or delivered the goods. This results in a decrease in liabilities and an increase in net income, which in turn increases retained earnings and stockholders' equity.

Reporting Revenues on the Income Statement That Were Previously Reported