If revenue is earned over two fiscal periods, one should initially credit the Unearned Revenue account.

Question

Quizplus · Accepted Answer

This is because revenue cannot be recognized as earnings until it has been earned, which means that the service or product has been delivered to the customer. Therefore, in the initial period, when revenue is received but not yet earned, it should be recorded as a liability in the Unearned Revenue account. Once the service or product is delivered in the next period, the revenue can then be recognized as earnings and moved from the Unearned Revenue account to the Revenue account.

If Revenue Is Earned Over Two Fiscal Periods, One Should