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Unearned Revenues - Unearned Football Ticket Revenue...

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Unearned Revenues A magazine publisher such as Sports Illustrated may receive a customer's check when magazines are ordered. An airline company such as American Airlines often receives cash when it sells tickets for future flights. Season tickets for concerts, sporting events, and theatre programs are also paid for in advance. How do companies account for unearned revenues that are received before goods are delivered or services are provided? 1. When the compa increases (debits (credits) a curren the source of the 2. When the company earns the revenue, it decreases (debits) th and increases (credits) an earned revenue account. To illustrate, assume that Superior University sells 10,000 season football tickets at $50 each for its five-game home schedule. The entry is: Unearned Football Ticket Revenue (To record sale of 10,000 season tickets) As each game is completed, Superior records the earning of revenue with the following entry.
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Unformatted text preview: Unearned Football Ticket Revenue Football Ticket Revenue (To record football ticket revenues earned) The account Unearned Football Ticket Revenue represents unearned revenue, and the university would report it as a current liability. As the school earns the revenue, it reclassifies the amount from unearned revenue to earned revenue. Unearned revenue is material for some companies: In the airline industry, tickets sold for future flights represent almost 50% of total current liabilities. At United Airlines, unearned ticket revenue recently was the largest current liability, amounting to more than $1 billion. Illustration 10-1 shows specific unearned and earned revenue accounts used in selected types of businesses. Illustration 10-1 Unearned and earned revenue accounts...
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