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because it is needed to be earned, that's why it is liability
Let me clarify this answer a bit more. The reason unearned revenue is a liability is because you "owe" something in return for the cash received.
Say a customer pays you for $500 worth of watches and you plan to ship the watches the following month. You have the money for the watches, but you have not supplied the watches yet. Once you supply the watches to the customer, then your unearned revenue is moved to revenue and it is no longer a liability.
Now to the "why". This is because you as a company are obligated to fill the customers order/request to satisfy their purchase. If you are unable to fill the order, then you are liable for the balance and must "pay" the customer back.
So, until the obligation is fully met you must do one of two things,
1. fulfill the obligation with the service or product
2. refund the amount paid in full to the customer
Once one of these two are met, usually the latter, the obligation is met and any money received is "revenue" or money "earned".
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∙ 12y ago
Wiki User
∙ 11y agoopportunity cost
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Is unearned revenue a current or a long liabilities?
Unearned revenue is generally considered a current liability. The only time it would be a long term liability would be if the company does not reasonably expect to "earn" the revenue withing one year or less or one accounting period.
Is there any instances whereby unearned revenue could be classified as non current liability?
Yes, there could be instances where unearned revenue is classified as a non-current liability. This typically occurs when the company has received advance payment for goods or services that will be provided beyond one year or the operating cycle, whichever is longer. In such cases, the unearned revenue is recorded as a liability that will be recognized as revenue over a longer period.
What are the types of liability insurance?
In accounting terms, liability describes an obligation. It refers to money owed to complete a transaction, debt that has yet to be paid, or products or services that have been paid for but have not yet been rendered. There are two general classifications to sum up these types of liability: long term and short term/current liability. Long-term describes debt paid out over more than one year, while short-term liability refers to debt paid within a year or less. the two types of liability(in Business matter) are: 1.current liability 2.long-term liability
What are the types of liabilities?
In accounting terms, liability describes an obligation. It refers to money owed to complete a transaction, debt that has yet to be paid, or products or services that have been paid for but have not yet been rendered. There are two general classifications to sum up these types of liability: long term and short term/current liability. Long-term describes debt paid out over more than one year, while short-term liability refers to debt paid within a year or less. the two types of liability(in Business matter) are: 1.current liability 2.long-term liability
Is a bank loan a long term liability?
That depends, how much is the bank loan, how long is the loan for. Most times YES it would be a long term liability.One sure way of knowing whether it is long term or current. Long Term is a loan or payable that will not be paid off in one years time. Current is one that will be paid off in one years time or LESS!Just rememberCurrent Liability -Account Payable (short term) - 12 months or lessLong Term Liability -Note Payable (long term) - 1 year or moreNote... Liabilities that are short term are listed under current liabilities, Current Liability is the Balance Sheet category for a Short Term Liability.
What are Current liability?
Current liability is a liability that will be paid for in a short period of time, usually consisting of less than a year. Accounts payable are current liabilities, while notes payable are long term liabilities.
What is main difference between capital budget and revenue budget?
While the capital budget and revenue budget are both budgets, the capital budget is incorporated for the long term. A revenue budget is made for the short term.
Is Demand loan a current liability or a long term liability?
a current liability
How is revenue from stock investing taxed?
Taxes on investment gains fall into two categories, long and short term capital gains.
Do you know of anywhere that they charge the same for short term and long term airport parking?
All major airports have different rates for both short term and long term parking. This helps generate revenue for the airports.
Is subordinated capital notes a current liability or a long term liability?
Long term
Is it true all long term liabilties become current liabilities?
Long term liability becomes the current liability in that year in which it is to be cleared so Yes, long term liability become current liability.
