Deferred Revenue

Deferred revenue refers to advance payments a Company receives for products or services that are to be delivered or performed in the future.

It is also known as unearned revenue.

The company that receives the prepayment records the amount as Deferred Revenue on their balance sheet as a liability. Deferred revenue is a liability because it refers to revenue that has not been earned and represents products or services that are owed to a Customer. As the product or service is delivered over time, it is recognized as revenue on the income statement.

1. Configuring Deferred Accounting