Journal Entry for Ticket Sales
A ticket sale is the amount of cash that a company receives from the sale of the right to get into any event or location.
some companies operate events such as football matches, concerts, shows as their business. They generate revenue by selling the ticket to the customer. The company gives the right to the customer to experience the event or specific location over a period of time.
The ticket for these events is usually sold to customers days or months in advance. It means the company receive cash and issue the ticket to the customer before the event takes place.
We have to take a look at the revenue recognition criteria that the company has to follow. It will not be related to the cash received as the accounting follow the accrual basic. The revenue will be recorded when the company delivers goods or services to the customer. In this situation, they can record revenue when the event takes place, the customer has experienced it.
When the tickets are sold, the company receives cash, which means representing the company’s obligation to fulfill the customer demand in the future. They have to ensure the happening of concert, show or sport even.
The sale of tickets in advance is considered unearned revenue. The company has to record cash received and unearned revenue. The company will reverse it to the sales revenue after the event has finished.
Journal Entry for Ticket Sales
When the company sells tickets to customers, they will receive cash and create unearned revenue. The journal entry is debiting cash and credit unearned revenue.
| Account | Debit | Credit |
|---|---|---|
| Cash | $$$ | |
| Unearned Revenue | $$$ |
The unearned revenue will present as the current liability on the balance sheet.
When the event has finished, it means the company has fulfilled its obligation to the customer. The service is delivered, it the time record revenue as well. They have to reverse the unearned revenue to sales revenue on income statement.
The journal entry is debiting unearned revenue and credit sale revenue.
| Account | Debit | Credit |
|---|---|---|
| Unearned Revenue | $$$ | |
| Sales Revenue | $$$ |
The transaction will remove the unearned revenue from balance sheet and record it as the sale on income statement.
Example
ABC is a company that prepares a concert for a famous singer. Due to the popularity, the tickets will be sold out a few months before the event take place. In the last event, company has sold all the tickets for $ 5 million. The tickets are sold 5 months in advance. Please prepare the journal entry for ticket sales.
ABC has sold the tickets for $ 5 million in advance, it is the unearned revenue for the company. They have to record cash received and unearned amount. The journal entry is debiting cash of $ 5 million and credit unearned revenue of $ 5 million.
| Account | Debit | Credit |
|---|---|---|
| Cash | 5,000,000 | |
| Unearned Revenue | 5,000,000 |
It will increase the cash received from customers and the current liability on balance sheet.
When the company prepares a concert for the customer, it will the point of sale. They have to record revenue by debit unearned and credit sales revenue.
| Account | Debit | Credit |
|---|---|---|
| Unearned Revenue | 5,000,000 | |
| Sales Revenue | 5,000,000 |
