What is an unearned royalty and why is it a liability?

Answer 1

In GAAP, I have never heard of the term Unearned Royalty, however, the "unearned" is pretty much the same in all accounting.

The reason anything "unearned" is considered a liability is because you (as the company) owes something in return. If a customer pays for you to say paint their house and they pay you "before" you paint the house, 1. you either have to paint the house or 2. return their money if unable to complete the task. This makes it a liability to you until "after" you have completed the job (service) or supplied the product.

It's just the opposite if you say paint their house "before" they pay you, then they owe "YOU" and therefore it is listed in the books as a "Receivable" and is listed as an Asset.