Deferred Revenue is money received by a business in advance for goods or services that have not yet been delivered or performed. It is recorded as a liability until the service is provided.
Deferred Revenue, also known as unearned revenue, arises when a company receives payment before fulfilling its obligation. Since the company still owes the service or product, this amount is recorded as a liability on the balance sheet.
Once the company delivers the service or product, the deferred revenue is gradually recognized as income in the profit and loss statement.
Deferred revenue accounting follows standard guidelines such as those defined under accrual accounting and international standards like :contentReference[oaicite:0]{index=0}, which govern how and when revenue should be recognized.
"A company receives ₹12,000 for a 12-month subscription. Initially, it records ₹12,000 as deferred revenue. Each month, ₹1,000 is recognized as income."