Unearned Revenues
Accounting glossary · Understand, connect, apply
Unearned revenue is an obligation arising when an entity receives consideration before earning the related revenue. For many customer contracts it is called a contract liability.
Example
A gym receives $300 for three future months. Initially record a liability; recognize $100 as revenue as each month’s service is supplied, assuming an even service pattern.
Remember the difference
Unearned revenue is not yet profit, even though the cash has arrived.
Updated 3 November 2026. Examples are simplified for learning. Where a term depends on US law, IFRS, US GAAP or a historical rule, check the context explained above and the requirements relevant to your course.
Study references: OpenStax financial accounting and managerial accounting. For reporting requirements, consult the applicable IFRS Standards or FASB guidance. US tax terms should be checked against the relevant tax-year IRS instructions.
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