What is revenues understated in unearned revenues? and it's example?

Revenues understated in unearned revenues refers to a situation where a company has received payment for goods or services that have not yet been delivered or performed, but the revenue has not been recognized on the financial statements. This occurs when the company has not yet earned the revenue and is obligated to provide the goods or services in the future.

An example of revenues understated in unearned revenues is a magazine subscription. Let's say a customer pays $100 for a one-year subscription to a magazine. The company receives the payment upfront but has not yet delivered the magazines to the customer. In this case, the $100 received would be recorded as unearned revenue on the balance sheet until the magazines are delivered over the course of the subscription period. As each magazine is delivered, the company would recognize a portion of the revenue as earned revenue on the income statement. If the company fails to recognize the revenue as it is earned, the revenues would be understated in the unearned revenues account.