Which type of liability is recorded for unearned revenue?

Unearned revenue is classified as a current liability because it represents money received by a company for goods or services that have not yet been delivered or performed. Since this revenue will typically be earned within one operating cycle (usually a year), it is expected to be settled in the near future. As transactions are fulfilled, the unearned revenue is recognized as earned revenue in the income statement, and the liability is subsequently reduced. This classification allows businesses to accurately reflect their obligations on the balance sheet and ensures compliance with the revenue recognition principle in accounting.