Deferred Revenue Journal Entry Accounts Receivable

Deferred revenue journal entry bookkeeping explained.

Deferred revenue journal entry accounts receivable. How is deferred revenue connected to accounts receivable. In this example no cash is received in month 1. In this video on deferred revenue we will look at definition examples and deferred revenue journal entry in accounting. The business now has an asset trade accounts receivable or trade debtor for the amount due.

Analogous to allowance for doubtful accounts when return actually occurs reduce both allowance and face value of accounts receivable or cash by the invoice amount. In this case you would simply debit cash and credit the deferred revenue account in the first accounting period for the sum received. In many deferred revenue examples cash is received in the first period. In simple terms deferred revenue means the revenue that has not yet been earned by the products services are delivered to the customer and is receivable from the same.

Typically seller sets up a contra asset account allowance for returns. An example would be a magazine company receiving payments for a year subscription if its magazine. Revenue is reported net of the amount expected to be returned. Deferred revenue is money you have received for good or services that you have not yet sold or performed.

It is like being prepaid for something.