Deferred Revenue


Deferred revenue refers to payments received by a company for goods or services that have not yet been delivered or performed.

Why it matters

Deferred revenue is recorded as a liability on the company's balance sheet because it represents an obligation to provide the product or service in the future. Deferred revenue is important in financial accounting as it ensures that revenue is recognized in the period in which the goods or services are actually provided. By properly accounting for deferred revenue, a company provides a more accurate representation of its financial position and performance.