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19.3
PREPAID REVENUE
© Michael Allison, Trinity Grammar School.
Author’s permission required for external use
 Prepaid Revenue: is revenue received but not yet earned. Example:
NovemberOctober
19.3 PREPAID REVENUE
Airline earns Revenue by flying
customer to destination
Customers pays airline $90,000
for flights
Balance-Day
$80,000 of the flights have
been made in October
$10,000 of the flights will be
made in November
© Michael Allison, Trinity Grammar School.
Author’s permission required for external use
 Prepaid Revenue: is revenue received but not yet earned. Example:
NovemberOctober
• There is an inflow of economic
benefits – the $80,000 is earned
• There is an increase in Assets – the
Cash account
• There is an increase in Owner’s
Equity
• There is a present obligation – to
provide $10,000 of flights
• Arising from a past event– the
customers paid in October
• There will be an outflow of future
economic benefits – the resources
required to provide the flights
Revenue
EARNED
Liability
UNEARNED
19.3 PREPAID REVENUE
Balance-Day
© Michael Allison, Trinity Grammar School.
Author’s permission required for external use
NovemberOctober
Income Statement for October
Revenue $
Airfares sales 80,000
Balance Sheet at 31 October
Current Liabilities $
Prepaid airfares revenue 10,000
Revenue EARNED Liability UNEARNED
19.3 PREPAID REVENUE
Balance-Day
© Michael Allison, Trinity Grammar School.
Author’s permission required for external use
TASK
In-class Homework
SQ1 X
SQ2 X

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Prepaid Revenue Accounting Explained

  • 2. © Michael Allison, Trinity Grammar School. Author’s permission required for external use  Prepaid Revenue: is revenue received but not yet earned. Example: NovemberOctober 19.3 PREPAID REVENUE Airline earns Revenue by flying customer to destination Customers pays airline $90,000 for flights Balance-Day $80,000 of the flights have been made in October $10,000 of the flights will be made in November
  • 3. © Michael Allison, Trinity Grammar School. Author’s permission required for external use  Prepaid Revenue: is revenue received but not yet earned. Example: NovemberOctober • There is an inflow of economic benefits – the $80,000 is earned • There is an increase in Assets – the Cash account • There is an increase in Owner’s Equity • There is a present obligation – to provide $10,000 of flights • Arising from a past event– the customers paid in October • There will be an outflow of future economic benefits – the resources required to provide the flights Revenue EARNED Liability UNEARNED 19.3 PREPAID REVENUE Balance-Day
  • 4. © Michael Allison, Trinity Grammar School. Author’s permission required for external use NovemberOctober Income Statement for October Revenue $ Airfares sales 80,000 Balance Sheet at 31 October Current Liabilities $ Prepaid airfares revenue 10,000 Revenue EARNED Liability UNEARNED 19.3 PREPAID REVENUE Balance-Day
  • 5. © Michael Allison, Trinity Grammar School. Author’s permission required for external use TASK In-class Homework SQ1 X SQ2 X