Unearned revenue is cash received before the company has delivered the good or service.
It is a liability because the company still owes performance to the customer.
Typical flow:
- Receive cash in advance → liability rises
- Deliver the good or service → liability falls and revenue is recognized
It often appears as a current liability on the Balance Sheet and is a standard example of Accrual-Basis Accounting & Cash-Basis Accounting.