#cfa-level-1 #reading-23-financial-reporting-mechanics
If necessary, a journal entry will include an explanation of the transaction and documented authorization to record the entry.
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Open itJournal entries—recorded in journals—are dated, show the accounts affected, and the amounts. If necessary, the entry will include an explanation of the transaction and documented authorization to record the entry. As the initial step in converting business transactions into financial information, the journal entry is useful for obtaining detailed information regarding a particular transaction.</sOriginal toplevel document
Open itved and the corresponding liability to deliver newsletters) and, subsequently, 12 future adjusting entries, the first one of which was illustrated as Transaction 12. Each adjusting entry reduces the liability and records revenue.
<span>In practice, a large amount of unearned revenue may cause some concern about a company’s ability to deliver on this future commitment. Conversely, a positive aspect is that increases in unearned revenue are an indicator of future revenues. For example, a large liability on the balance sheet of an airline relates to cash received for future airline travel. Revenue will be recognized as the travel occurs, so an increase in this liability is an indicator of future increases in revenue.
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