What term describes cash received for goods or services that have not yet been provided?

The term that describes cash received for goods or services that have not yet been provided is unearned revenue. This concept refers to a liability representing an obligation to deliver goods or services in the future. When a company receives cash before fulfilling its part of the transaction, it creates an obligation to provide the agreed-upon service or product later. In accounting, unearned revenue is recorded as a liability on the balance sheet because the company has not yet earned the revenue by delivering the goods or services.

By recognizing unearned revenue, a company adheres to the revenue recognition principle, which states that revenues should only be recognized when they are earned. This ensures that financial statements accurately reflect the company’s financial position and do not overstate earnings. Once the service is rendered or the goods delivered, the liability decreases, and revenue can be recognized in the income statement, reflecting the true earned income.

Deferred revenue could also describe this scenario; however, it is less commonly used than unearned revenue. Accrued revenue refers to income earned but not yet received, while current assets represent resources owned that are expected to be converted into cash within a year. Thus, unearned revenue is the most accurate term for cash received beforehand for undelivered goods or services.