Unearned revenue was not adjusted to show $3,000 of revenue earned during the current period. What is the effect of this error on the balance sheet?

Question

Quizplus · Accepted Answer

Unearned revenue is a liability that represents revenue received but not yet earned. If $3,000 of revenue was actually earned during the period but not adjusted, it means the liability (unearned revenue) is still recorded as higher than it should be. Therefore, liabilities are overstated.

Unearned Revenue Was Not Adjusted to Show $3,000 of Revenue