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The company you are investigating recognized unearned revenue as earned revenue. This is an example of liability understatement fraud.
Core paper. Unearned revenue is money received by an individual or business for services or products that have not yet been provided or provided. This is recorded as a liability on the company's balance sheet as it is a liability to the customer.
Unearned income. Refers to cash received prior to the delivery of goods or services. Unearned income is a liability. Unearned revenue becomes earned revenue when the product or service is provided.
Since deferred income is a current liability, changes in deferred income from the previous year affect the operating value shown in the company's financial statements.
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