Deferred Revenue
Unearned Revenue Refund Journal Entry
How to record refunds when previously deferred revenue is canceled.
Scenario
Customer prepays $3,000; contract canceled before service delivery. Full refund issued.
Journal Entries
Reverse liability and pay refund.
| Account | Debit | Credit |
|---|---|---|
| Deferred Revenue | $3,000 | |
| Cash | $3,000 |
Explanation
If service not delivered, revenue was never earned; liability is extinguished via refund.
Variations
Partial delivery requires split between earned revenue and refund.
Common Mistakes to Avoid
- ✗Recognizing revenue before service delivery.
FAQs
Common questions about this journal entry
Not if revenue wasn’t earned; it reduces liability.
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