What is the entry for earned & unearned revenue collected in advance?

CFA Level I FRA
#1

Hi - would really appreciate it if someone could double check if my reasoning is correct. Thank you!

Recording the earned portion of revenue collected in advance - I have no idea what this means…would it be:

DR Unearned Revenue

CR Revenue

Is it essentially an adjusting entry for unearned revenue?

Recording the unearned portion of revenue collected in advance

(1) Shock: Recording unearned portion of revenue

DR Cash

CR Unearned Revenue

(2) Shock: Revenue is earned (adjusting entry)

DR Unearned Revenue

CR Revenue

#2

What you said is correct

#3

Thank you, I appreciate it.

#4

If you collected money in advance then you haven’t yet earned the revenue. The term " earned portion of revenue collected in advance" does not make sense.

#5

That’s exactly what I was confused about! Now that I think about it, it might be a red herring. Who knows …

#6

I think what you mean is that initially there were advances received, in which case you made this entry

DR Cash

CR Unearned/deferred revenue (balance sheet)

and then when you start invoicing (earning it) you do

DR Unearned revenue

CR Revenue

to slowly eat away the balance sheet entry

#7

Thank you for the clarification :slight_smile: