Unearned income is shown ___________________.

By way of addition in the income statement

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As a current Asset

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As a fixed Asset

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As a current liability

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Solution

The correct option is B As a current liability
Unearned income or advance income is the income that is received but is not earned yet. It is a liability for the company as it is not earned yet. It is obligation on the part of the company to provide the goods/services for the money so received. It is a current liability as it is expected that the company will discharge its obligation within a year.

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Similar questions

Accrued income is credited to the profit and loss account and shown in the balance sheet as a current asset. Why?

Current assets of a business firm should be financed through

(a) current liability only

(b) long-term liability only

A fixed asset should be financed through

(a) a long term liability

(b) a short term liability

Current assets of a business firm should be financed through:

(a) Current liability only

(b) Long-term liability only

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