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

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

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

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