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    Shirleyan's Avatar
    Shirleyan Posts: 13, Reputation: 1
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    #1

    Apr 9, 2007, 08:59 PM
    Unearned Revenue
    This entry applies to a company for the month of December, ended 12/31/ 2005.

    On January 2005, the company was paid $3,840 in advance to provide monthly service for one year. The company began providing the services on May 1, 2005.

    How do record the entry as for the month of December?

    Thank you very much!
    CaptainForest's Avatar
    CaptainForest Posts: 3,645, Reputation: 393
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    #2

    Apr 9, 2007, 09:26 PM
    You are given 3,840 for May 1, 2005 – April 30, 2006.

    On Jan 1, 2005 when you received it, your JE would have been:
    Dr. Cash 3,840
    Cr. Unearned Revenue 3,840

    Every month, starting May 30 and beyond, you record 1/12 of the amount as earned revenue and draw down your liability account.

    3,840 x 1 / 12 = 320

    December Entry:
    Dr. Unearned Revenue 320
    Cr. Revenue 320
    Shirleyan's Avatar
    Shirleyan Posts: 13, Reputation: 1
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    #3

    Apr 9, 2007, 09:41 PM
    Thank you very much for your time and help!
    CaptainForest's Avatar
    CaptainForest Posts: 3,645, Reputation: 393
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    #4

    Apr 9, 2007, 09:51 PM
    You're welcome
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