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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".
What else can I help you with?
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?
When long term liabilities are due after 12 months, then (part of) unearned revenue can be long term. This could be the case with long term contracts, such as maintenance, help-desk support, etc, where the fees for such services are paid up front for several years by the customer.
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.
How can I offset long term capital gains with short term losses to minimize my tax liability in the long term?
You can offset long-term capital gains with short-term losses by selling investments that have decreased in value within the same tax year. This strategy can help reduce your overall tax liability by balancing out gains with losses.
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
