If the accountant for Sam Consulting Company failed to adjust the unearned revenue account for $3,000 of revenue that has now been earned, this means that its liabilities are overstated for the period.
Unearned revenue is considered a liability because it represents money received for services or products that have not yet been provided. When the revenue is actually earned, the liability should be reduced (decreased) by that amount, and revenue should be recognized. Because this adjustment was not made, the liabilities remain higher than they should be by $3,000.
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