 Unearned revenue is an example of a deferral adjusting entry. It occurs when cash is received before revenue is earned. Unearned revenue is a liability until the service has been performed. Make sure you note that. It's a liability, not a revenue. Let's look at this example. Assume on April 1, the Utah Jazz sell me season tickets for $6,000. The season starts in October and runs through April. Let's answer the following questions. What is the journal entry on April 1? Is this an adjusting entry? What are the balances on the unadjusted trial balance for unearned ticket revenue and ticket revenue? The journal entry on April 1 is a debit to the asset account cash and a credit to the liability account unearned ticket revenue for $6,000. This is not an adjusting entry because there is an underlying transaction that happened on April 1. So the unadjusted balance for unearned ticket revenue at the end of the year is still $6,000. As of yet, no ticket revenue has been recorded. What is the adjusting entry for December 31, then, assuming the Utah Jazz have played one third of its season? Since $2,000 of the unearned ticket revenue has now been earned, we need to debit the liability account unearned ticket revenue and credit the revenue account ticket revenue for $2,000. After posting this adjusting entry, the balance remaining in the unearned ticket revenue account is now $4,000 and the ticket revenue has been recorded to show $2,000 of earned revenue.