What is an example of an unearned revenue account?

The correct answer, Deferred Revenue, exemplifies an unearned revenue account because it represents money that has been received by a business for goods or services that have not yet been delivered or performed. This concept is crucial in accrual accounting, which recognizes income when it is earned rather than when cash is received.

In the case of Deferred Revenue, the business is obligated to provide products or services in the future, and until that obligation is fulfilled, the funds collected are classified as a liability on the balance sheet, reflecting that it still owes something to the customer. This ensures that the financial statements accurately represent the company's obligations and revenues.

The other choices represent different types of accounts that do not align with the definition of unearned revenue. For example, Accounts Receivable indicates amounts owed to the company by customers for goods or services already delivered, while Prepaid Expenses refer to payments made for expenses that will benefit future periods. Accounts Payable, on the other hand, denotes amounts the business owes to suppliers for goods or services received, which also does not fit the unearned revenue concept.