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Prepaid revenue

Treatment of Prepaid Revenue in Accrual Accounting

December 12, 2023

How does accrual accounting treat prepaid revenue?

Accrual accounting treats prepaid revenue as a liability until the service or product is delivered. When cash is received for services not yet provided, it's recorded as unearned or deferred revenue. As the services are rendered or goods delivered, this liability decreases, and revenue is recognized, aligning with the matching principle in accrual accounting.

Tags : Accrual Accounting , Prepaid Revenue , Deferred Income

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