Definition of Deferred revenue:
Deferred revenue, also known as unearned revenue, refers to advance payments a company receives for products or services that are to be delivered or performed in the future. The company that receives the prepayment records the amount as deferred revenue, a liability, on its balance sheet.
Prepayment received from customers or tenants, and carried forward as a liability until the associated goods, services, or benefits are delivered. Also called deferred liability or deferred credit.
Deferred revenue is a liability because it reflects 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 proportionally as revenue on the income statement.
How to use Deferred revenue in a sentence?
- Deferred revenue is recognized as earned revenue on the income statement as the good or service is delivered to the customer.
- Deferred revenue is a liability on a company's balance sheet that represents a prepayment by its customers for goods or services that have yet to be delivered.
- The use of the deferred revenue account follows GAAP guidelines for accounting conservatism.
- If the good or service is not delivered as planned, the company may owe the money back to its customer.
Meaning of Deferred revenue & Deferred revenue Definition