Q39. Unearned revenue
On December 1, 20×1, Entity A received $600 for a one-year subscription for twelve issues of a monthly magazine. The magazine is mailed on the 20th of each month.
What are the journal entries to be prepared on December 1 and 31, 20×1?
A39. Unearned subscription revenue is recognized when cash is received at the beginning of the subscription period. Unearned subscription revenue is a liability account.
(1) December 1, 20×1: to record the cash receipt in advance
| Debit | Credit | |
| Cash | 600 | |
| Unearned subscription revenue | 600 |
[Note]
Increase in unearned subscription revenue (liability): credit
(2) December 31, 20×1: to recognize subscription revenue for December 20×1
| Debit | Credit | |
| Unearned subscription revenue | 50 | |
| Subscription revenue | 50 |
[Note]
1. Decrease in unearned subscription revenue (liability): debit
2. Increase in subscription revenue (revenue): credit
3. One year subscription = $600
4. Subscription revenue for December 20×1 = $600 x 1/12 = $50