What occurs to unearned revenue when the corresponding service is provided?

When the corresponding service is provided for unearned revenue, it is necessary to recognize that this previously recorded liability no longer exists. Unearned revenue represents money received in advance for services or products that have not yet been delivered. Once the service has been performed, the business must adjust its accounts to reflect this change.

In this case, the unearned revenue account is debited, thereby reducing the liability, because the obligation to deliver the service has now been fulfilled. Simultaneously, a revenue account is credited, which recognizes the income earned from providing the service. This adjustment appropriately reflects the completion of the service in the financial records, transitioning the balance from a liability to recognized income on the income statement.

The other options do not accurately depict the treatment of unearned revenue upon completion of the service; they either suggest no change or misrepresent the nature of the accounting entries involved.