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Accounting
Unearned Revenue
Money a company receives before it has actually earned it by delivering the product or service.
Unearned revenue sits as a liability on the balance sheet until it's earned. Each month an adjusting entry moves part of it to revenue. It's also called deferred revenue.It's like getting paid for a pizza before you even turn on the oven — you have the cash but you still owe the pizza.
Real world: A streaming service collects $120 for a yearly subscription in January but only earns $10 of it each month as the customer watches shows.
💡 Unearned revenue protects the company from overstating how much money it has truly made — always record it as a debt until you deliver the goods.