You are in charge of a storage shed business. You recognize sales when the shed is fully installed in the customer’s yard. Your company takes 25% deposits on all orders. At the end of your accounting cycle, you have $500,000 in customer deposits. How do you state and properly account for this activity in your financial statements and why?

Dr. Cash 500,000
Cr. Unearned Revenue 500,000

Unearned Revenue since you are not yet recognizing it.

You might also want to look into the percent completion method, but that is a choice that should be made by each company based on the specifics of the case.