![]() Netflix offers TV series, documentaries and feature films across various genres and languages. If so, this amount will be recorded as revenue in the current period.įor example, let’s look at a simple example using Netflix. ![]() At the end of a period, the business will review the account to see if any of the unearned revenue has been earned. Recording the revenue must be deferred until the revenue is earned (i.e goods are provided or services performed). Since the business has not yet provided the product or service, it cannot recognise the customer’s payment as revenue but instead must record a liability. Recall that unearned revenue (sometimes known as deferred revenue or revenue received in advance) represents a customer’s advanced payment for a product or service that has yet to be provided by the business. Not all accounts require updates, only those not naturally triggered by an original source document such as a sales invoice or a payment bill. Before we look at recording and posting these four common types of adjusting entries, we discuss each scenario further below. Adjusting entries requires updates to specific account types at the end of the period. The required adjusting entries depend on what types of transactions the business has, but as briefly introduced above, there are four major circumstances/scenarios in which adjusting journal entries are necessary. This means a business must recognise revenues and expenses in the proper period, requiring adjustment to certain accounts to meet these criteria.
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