top of page

Revenue: Common Journal Entries

Updated: Sep 1, 2019

This article reviews some common journal entries used when recording transactions related to Revenue.

Scenario 1:

If Cash has been received, but Revenue cannot yet be recognized (e.g.: product has not yet been shipped, service has not been rendered):

This journal entry creates a liability account called “Unearned Revenue”. Because we received cash for something they has not yet been earned, we must book this as a liability - we owe the client something.

Once the revenue can be recognized (e.g.: the services have been rendered/goods have been delivered):

This journal entry empties out the liability account “Unearned Revenue” and appropriately records the Revenue earned.

Scenario 2:

Revenue can be recognized, but no cash has been received:

This journal entry creates an asset “Accounts Receivable”.

Once Cash has been received:

This empties out the Accounts Receivable account and adds to the Cash balance.

Scenario 3:

A 5% discount is applied to Revenue earned.

Option 1:

This journal entry simply books the Revenue net of the 5% discount.

Option 2:

Revenue is first recognized at full price.

The discount is then deducted from the Revenue account and included in the contra-Revenue account, entitled "Sales Discounts". Note that a contra-revenue account is not an account that is shown on the entity’s Financial Statements. It is simply a placeholder account that the entity uses to keep track of their discounts.

Help improve this article

If you have feedback or questions, please leave a comment in the section below.

Sign Up!

Click our Sign Up button (top of page) to receive updates, additional exam prep information and to connect with our community.

Up Next: Expenses ->

375 views0 comments

Recent Posts

See All

Analyzing Financial Issues

When analyzing financial case studies, always break them down into smaller issues, which can then be addressed individually. If you are writing your CPA Exams (CFE or others), exam time will be const

Statement of Financial Position / Balance Sheet Elements

The Statement of Financial Position (a.k.a Balance Sheet using Canadian ASPE accounting standards) presents the company's total assets, liabilities and the netted amount - called shareholder's equity.

Statement of Profit or Loss / Income Statement Elements

The Statement of Profit or Loss (a.k.a. Income Statement using Canadian ASPE) shows the company's earnings and expenses. Different countries may have their own unique presentation standards for the sa


bottom of page