# Unearned Revenue

***Unearned revenue*** (also known as “prepaid liability” and “subscriber liability”) is made up of subscriber payments which have been processed but for which products have not yet been delivered. As products are delivered, unearned revenue becomes earned revenue.

Run this report at the end of each fiscal period to update the general ledger Unearned Revenue GL account. This account is credited for subscriber payments and debited as subscriptions are delivered. The Unearned Revenue report can be created in a summary form, listing totals by delivery method or district, or it can be created in detail form, listing individual subscribers as well. You may choose to create the report without updating the general ledger, to study account information.

Business Rules determine whether you report unearned revenue separately for a certain day of the week (such as Sunday). If you do, unearned revenue for this day will be displayed in a separate column from the other days. Otherwise, all unearned revenue will be reported in one column. Business Rules also determine if “earned” revenue is stored by Circulation (this may be necessary for taxing purposes).

## How Unearned Revenue is Calculated

Unearned revenue is calculated by first determining the remaining copies or publishing days in the subscription. This is done by subtracting the run date from the expiration date, and taking into account the subscriber’s delivery schedule and the publishing calendar. The average copy rate (based on the payment amount and the subscription period) is then multiplied by the number of days remaining in the subscription. Unearned revenue will be calculated differently based on whether the newspaper uses a single average copy rate or varies copy rates by day of the week.

| An example using a single average copy rate would be:                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
| ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |
| <p><mark style="color:orange;">Payment amount = 18.00 for a 3-month subscription</mark></p><p><mark style="color:orange;">Average copy rate = 0.20</mark></p><p><mark style="color:orange;">Subscription expiration date = 6/30</mark></p><p><mark style="color:orange;">Report date = 5/31</mark></p><p><mark style="color:orange;">Publishing days remaining in subscription = 6/30 - 5/31 = 30</mark></p><p><mark style="color:orange;">0.20 x 30 days remaining in subscription = 6.00 unearned revenue</mark></p> |

| Rate by day would be calculated a little differently:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
| -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |
| <p><mark style="color:orange;">Payment amount = 18.00 for a 3-month subscription (Sundays = 22% of subscription, other days = 13% each)</mark></p><p><mark style="color:orange;">Sunday average copy rate = 0.31</mark></p><p><mark style="color:orange;">Average copy rate for other days = 0.18</mark></p><p><mark style="color:orange;">Subscription expiration date = 6/30</mark></p><p><mark style="color:orange;">Report date = 5/31</mark></p><p><mark style="color:orange;">Sundays remaining in subscription (5/31 to 6/30) = 4</mark></p><p><mark style="color:orange;">Other days remaining in subscription (5/31 to 6/30) = 26</mark></p><p><mark style="color:orange;">0.31 x 4 Sundays remaining in subscription = 1.24 unearned revenue</mark></p><p><mark style="color:orange;">0.18 x 26 other days remaining in subscription = 4.68 unearned revenue</mark></p><p><mark style="color:orange;">Total unearned revenue = 5.92</mark></p> |

If the subscriber renews early, the entire payment amount is included in the unearned revenue calculations. In addition, discount amounts are amortized over the subscription term, just as payment amounts are amortized. For example, say Circulation determines that the actual rate for the subscription discussed in the first example should be 20.00 (based on the subscription rate code):

| <p><mark style="color:orange;">Subscription rate 20.00 - Payment amount 18.00 = 2.00 discount amount for the subscription term</mark></p><p><mark style="color:orange;">2.00 divided by 90 days (number of days in the subscription term) = 0.02, the average discount rate</mark></p><p><mark style="color:orange;">0.02 x 30 days remaining in the subscription = 0.60</mark></p> |
| ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |

Discount amounts are shown in the Unearned Revenue report under the appropriate column (current payments, earned revenue, prior period, and so on), and on a separate line for each account (or summary total), along with any refund write-offs for the account.

Although payments make the most impact, unearned revenue is also adjusted by transfers, grace, refunds, and donations. A subscriber’s unearned revenue might be listed as shown here:

<table data-header-hidden><thead><tr><th width="150"></th><th width="313"></th><th></th></tr></thead><tbody><tr><td></td><td>Prior Period Unearned Revenue</td><td>34.67</td></tr><tr><td>+</td><td>Payments</td><td>72.05</td></tr><tr><td>+</td><td>Transfers</td><td></td></tr><tr><td>-</td><td>Grace Paid</td><td>15.68</td></tr><tr><td>-</td><td>Refunds</td><td></td></tr><tr><td>-</td><td>Write-offs</td><td></td></tr><tr><td>-</td><td>Donations</td><td></td></tr><tr><td>-</td><td>New Unearned Revenue</td><td>54.37</td></tr><tr><td>+</td><td>Expire Changes</td><td></td></tr><tr><td>=</td><td>Current Earned Revenue<br>(Sunday - 12.33)<br>(Other - 24.34)</td><td>36.67</td></tr></tbody></table>

{% hint style="info" %}
**Notes:**

* If subscriber rates are changed within a subscription term, the subscription will not be affected (unearned revenue will be calculated based on the old rate). Only payments processed after the date of a rate change will be affected.
* Earned revenue is calculated using this formula: Prior period’s unearned revenue + payments + transfers - refunds - donations - grace - writeoffs - current unearned revenue.
* The formula for calculating current discounts is Prior period’s discounts + payment discounts - new unearned discounts = discounts earned.
* If you offer day pass subscriptions, single day passes are earned when they are paid for, while day pass bundles are earned as they are used.
* If you charge for bonus days using the “premium day” method (see [Premium Day](/circulation-user-manual/11-utilities/subscription-address-menu/bonus-day-adjustment.md#premium-day)), premium amounts will be included in the full payment amount in the Payments column. The subscriber’s wallet amount will be included in their ending Unearned balance. Premium days are “earned” with a negative payment adjustment, and so amounts for premium days delivered during a period will not affect the Earned Revenue column. Instead they will be a negative adjustment to the Payments column. Therefore if the premium day is paid for and delivered within the same reporting period, it will have no impact on the Unearned Revenue report.
* **If any of the following activities have taken place since the last day of the period, a Historical Unearned or Grace Due should not be run.**

  * **Change in the Premium Day Calendar**
  * **Run any Premium Day processing**

  **Note:** *If you are using Premium Day or a wallet of any kind, it is time sensitive.*
  {% endhint %}

### **Subscriber Inclusion in the Unearned Revenue Report**

The **Unearned Revenue Report** includes subscribers based on billing method, account balance, and payment date relative to the publishing date.

Subscribers with a **Comp** billing method are included only when an actual balance exists.

A subscriber with a **Comp** billing method is **not included** in the report when all of the following conditions are met:

* The subscriber has a **$0 balance**
* The **Bonus Day** setting is **No**
* A future **Premium Day** exists in the **Bonus Day setup**
* The billing method is **not Office Pay**

Subscribers with a **Comp** billing method are included when a balance exists, such as:

* **Unallocated funds**
* **Unreimbursed premium day amounts**
* Balances carried forward after transitioning from **Office Pay**

The report includes:

* **Non-Office Pay** subscribers with a valid balance and a payment dated **on or before the publishing date**
* **Office Pay** subscribers with balances or refunds who have transitioned to **Comp**

The report excludes:

* Payments dated **after the publishing date**

## Running Unearned Revenue

To update unearned revenue and create the report:

1. Select Unearned Revenue from the Management menu to display the Unearned Revenue Report window.<br>

   <figure><img src="/files/LVw3gnADzEIuggtXlqaA" alt=""><figcaption></figcaption></figure>

2. Click Add and complete the following fields.<br>

   <table><thead><tr><th width="160">Field</th><th width="119.1803852889667">Type</th><th>What to enter</th></tr></thead><tbody><tr><td>ALL ACCOUNTS</td><td>yes/no</td><td>Indicate whether unearned revenue should be run for all accounts. If you do not select this checkbox, the Account Ranges Entry screen will appear after completing this screen for entering specific accounts to include.</td></tr><tr><td>PRODUCT</td><td>setup</td><td>Enter the product for which unearned revenue should be updated (enter “*” to multi-select products).</td></tr><tr><td>START DATE<br>END DATE</td><td>date</td><td>Enter the date range for which to run the report. If you are updating the general ledger, enter the first and last dates of this (ending) fiscal period. Final transaction processing and payment processing must be complete through the end date. No payments can be processed after this date until unearned revenue for this fiscal period is updated.</td></tr><tr><td>REPORT TYPE</td><td>predefined</td><td>Indicate whether this should be a detail or summary report.</td></tr><tr><td>UPDATE</td><td>yes/no</td><td>Indicate whether unearned revenue information should be updated in Circulation (the updated unearned revenue becomes the “Prior Period’s Unearned Revenue” the next time you generate the report). If unearned revenue has not been updated through the day prior to the START DATE, then PRIOR PERIOD will have only zeros.</td></tr><tr><td>CREATE G/L</td><td>yes/no</td><td>If you selected UPDATE, indicate whether general ledger entries for the unearned and earned revenue should be created.</td></tr><tr><td>EXPORT</td><td>yes/no</td><td>Select this checkbox if you want to create an export file.</td></tr><tr><td>FILE FORMAT </td><td>setup</td><td>Select the file map to use for this export. A file map must be set up previously.</td></tr><tr><td>FILE NAME</td><td>open</td><td>You can accept the default file name or modify it.</td></tr></tbody></table>

3. Click OK and then Continue to create general ledger entries (if Create G/L is selected) and the Unearned Revenue Report.

{% hint style="warning" %}
*A warning message— “Unearned revenue report is already in process for the same parameters in update mode.” will be displayed if you run a second Unearned Revenue report while the first report with the same parameters is still being processed.*
{% endhint %}

#### Running Unearned Revenue Using Batch

When running **Unearned Revenue** using the batch process (**Character Utilities > System > View/Print > Run > Batch**):

* If the batch file **End Date** is later than the current Publishing Date for the selected product and the **All Accounts** field is set to **Yes**, the process does not complete. The system displays the following error message: "*Publishing is not completed for product ‘xx’ on xx/xx/xx*"*.*
* If **All Accounts** is set to **No**, this validation does not occur and the message is not displayed.

### Unearned Revenue Columns

The Unearned Revenue columns are described below:

<table><thead><tr><th width="231.2381155831473">Column</th><th>What prints</th></tr></thead><tbody><tr><td>Account, Name</td><td>The subscription ID and name.</td></tr><tr><td>Prior Unearned Revenue / Disc</td><td>The subscriber’s unearned revenue at the beginning of the report period. The associated discount is displayed on the second line.</td></tr><tr><td>Earned Revenue / Disc</td><td>The portion of the subscription that was earned (delivered) during the report period. This will decrease the unearned revenue. The associated discount is displayed on the second line.</td></tr><tr><td>Payments / Disc</td><td>Payments that were effective in this report period. Payments increase unearned revenue. The associated discount is displayed on the second line.</td></tr><tr><td>Exp Chg / Disc</td><td>Changes to the subscription period caused by complaints or expire date modifications. These typically increase unearned revenue. The associated discount is displayed on the second line.</td></tr><tr><td>Transfer / Donations</td><td>Changes to the subscription period caused by money being transferred into or out of the account, or donations. Transfer-outs and donations decrease unearned revenue; transfer-ins increase it.</td></tr><tr><td>Grace / New Grace / Vac Pacs</td><td>If the subscriber was in grace during the report period, the value of the grace paid is displayed. The second line displays new grace. Any discounts for vacation packs are displayed on a third line.</td></tr><tr><td>Refunds / Writeoffs</td><td>If the subscriber received a refund during the report period, it is displayed in this column. Refunds decrease unearned revenue, and so do refund writeoffs, which are printed on the second line.</td></tr><tr><td>Unearned Revenue</td><td>The subscriber’s unearned revenue at the end of the report period.</td></tr><tr><td>Discounts</td><td>If the subscriber rate has a discount, the discount amount for each column will be displayed on the third line.</td></tr><tr><td>Columns in Second Section of Report</td><td>The second section of the report contains the subscription ID, name, current status, credit status, expire date, end grace date and invoice flag for subscribers currently in grace. The value of the grace days the subscriber has received within this reporting period is displayed in the Amount Owed column; the discount for that amount is listed in the Discount column. Note that Amount Owed is not the same as grace owed, which is typically created only after the grace period ends.</td></tr></tbody></table>

### Example—Unearned Revenue Report

<figure><img src="/files/oZ8iBWu3E2PZMZrlpgkD" alt=""><figcaption></figcaption></figure>


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