- Unearned income is money received by an individual or company for a service or product that has not yet been provided or delivered.
- It is reflected in the company’s balance sheet as a liability, as it represents a debt to the client.
- Once a product or service is provided, unearned income becomes income on the income statement.
- Early receipt of funds is beneficial for the company, as it increases its cash flow, which can be used for various business functions.