An unearned (deferred)revenue is reported as a liability because cash has been collected,but the related revenue has not been earned by the end of the accounting period.

Question

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An unearned (deferred) revenue is reported as a liability in the balance sheet because the company has received cash in advance from the customer, but the company has not earned the revenue until it delivers the goods or services as promised. Therefore, the liability is recognized until the revenue is earned.

An Unearned (Deferred)revenue Is Reported as a Liability Because Cash