Accounting for Patient Deposits: Understanding Unearned Revenue

When a hospital receives money in advance from a patient, it is recorded as a liability. This is because the hospital has an obligation to provide the patient with medical services in the future. The entry to record this transaction is:

Debit:

Cash

Credit:

Unearned Revenue

As the revenue earned through services has not yet been earned.

When the hospital provides the medical services, it will recognize the revenue and reduce the unearned revenue liability as well