Unearned Rental Revenue is
a. a contra account to Rental Revenue.
b. a revenue account.
c. a contra account to Accounts Receivable.
d. reported as a current liability.
I know its either A or D. What do you guys think?
2007-06-27 01:13:50 · 4 answers · asked by Anonymous in Business & Finance ➔ Personal Finance
If you have unearned rental revenue, it means your tenant has paid you rental in advance, say $1k. Assume he paid you on Dec 28 for Jan's rental. Your Dec journal would be:
Dr Cash $1k
Cr Unearned rental revenue $1k (a liability a/c)
It's a liab. a/c cos you haven't EARNED the income yet. You owe him a service, i.e. the renting out of the premises. Come end of Jan., when he's stayed there for a month, you've earned your income. Then your entry would be:
Dr Unearned rental revenue $1k
Cr Rental revenue $1k (revenue item)
So the answer is (d) reported as a current liability.
2007-06-27 02:12:22 · answer #1 · answered by Sandy 7 · 0⤊ 0⤋
Answer: (d) current liability
A contra account to revenue is similar to the deduction of revenue. This includes sales discount, sales return and allowance etc.
Unearned rental revenue is similar to owing the customer a service, hence it should be current liability.
2007-06-28 01:51:09 · answer #2 · answered by Janet 2 · 0⤊ 0⤋
A is correct
D has a problem - if it's a liability, who are you liable to? Prepaid rent is a liability only if it's refundable. It's refundable only if they cancel the lease during the period covered by the payment and you agree to give them the money back. If this happens (unlikely) move the money out of the account at that time.
2007-06-27 08:34:00 · answer #3 · answered by Ted 7 · 0⤊ 0⤋
d. reported as a current liability.
Base on the prevailing IAS. it should be recognized by the company as part of its current liability unless portion of it is will be due in more than a year or the normal operation cycle of the company.
hope this help.
2007-06-27 08:35:01 · answer #4 · answered by Carlos Joshua 2 · 0⤊ 0⤋