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Deferred revenue is important in accurate reporting of assets and liabilities on a company’s balance sheet. It protects against treating unearned income as an asset, and guards against overvaluing the company’s net worth.
Deferred revenue refers to the payments received in advance for services which have not yet been performed or goods which have not yet been delivered.
deferred revenue is an accrual accounting money received for goods or services which have not yet been delivered
Other terms ;
Deferred income ,un earned revenue
Example
An annual maintenance contract where the entire contract is involved an front “I received 12000 for an annual maintenance contract but need to recognize it as deferred income and then recognized 1000 each month as service i.e rendered
It is income based on accural concept of accounting. Revenue is recognised at the delivery of goods and services
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