Hi when unearned revenue is not recorded what is the impact

Hi, when unearned revenue is not recorded what is the impact to the income statement?

Solution

ANSWER:

Income statement or profit or loss statement is unaffected by unearned revenue as unearned revenue is included in the balance sheet and is only transfered to the revenue in the income statement when the work is completed by the firm.

lets take an example where a manufacturing firm has taken $6,000 for 6 months from another firm for providing goods but since $6,000 has been paid but the work has not been done and will be completed in 6 months and so after evey month $1000 will be included in the revenue in the income statement while the rest will be shown as unearned revenue in the balance sheet and so we can say that when unearned revenue is not recorded , there won\'t be any impact on the income statement as income statement doesn\'t include unearned revenue.