Unearned revenues definition including break down of areas in the definition. Analyzing the definition of key term often provides more insight about concepts. Unearned revenues can be defined as: Liability created when customers pay in advance for products or services; earned when the products or services are later delivered. Unearned revenue is a liability account, something that can be confusing given the name of unearned revenue because many people assume it to be a revenue type account but unearned revenue represents revenue that has not yet been earned, meaning we got some form of payment before work was done or inventory was delivered. This means we owe the work in the future which is why unearned revenue is a liability account, unearned revenue also being an account that generally needs adjusting during the adjusting process. Not all companies will use unearned revenue because not all businesses will receive payment before work is completed. Newspaper sales is an example of a business that would use unearned revenue because they often collect payment before they earn the revenue, before they deliver the paper.
