Final answer:
Unearned revenue is considered a liability because it represents money received for goods or services that haven't been provided. Adjustments are required at the end of each period to recognize the revenue in the proper period.
Step-by-step explanation:
Unearned revenue is considered a liability because it represents money received from customers for goods or services that have not yet been provided. It creates an obligation for the company to deliver the goods or services in the future. As a liability, unearned revenue is recorded on the balance sheet.
Adjustments are required at the end of each period because the unearned revenue is considered as a liability that will be converted into revenue once the goods or services are delivered. As time passes, the company earns a portion of the unearned revenue as it fulfills its obligations. The adjustment ensures that the revenue is recognized in the proper period and matches with the related expenses. It is necessary for accurate financial reporting and to provide a clear picture of the company's performance.