Deferred Revenue On Income Statement

As a result the unearned amount must be deferred to the company s balance sheet where it will be reported as a liability.

Deferred revenue on income statement. Deferred revenue is also known as unearned revenue or deferred income it s payment received by a company in advance for services it has not yet provided or goods it has not yet delivered. Increasing the cash and increasing deposit deferred income on the liability side. Money your company earns from selling goods or services goes into your books as revenue. On september 1 the company would record revenue of 100 on the income statement.

What is deferred revenue. In other words deferred revenues are not yet revenues and therefore cannot yet be reported on the income statement. Deferred revenue is money received by a company in advance of having earned it. Deferred revenue or unearned revenue refers to advance payments for products or services that are to be delivered in the future.

The difference between revenue on an income statement and deferred revenue on a cash flow statement. After the service is provided decreasing deposit deferred income and increasing the revenue account. On august 1 the company would record a revenue of 0 on the income statement. This contrasts with the cash basis of accounting wherein the opposite is true.

This money has not been earned and thus can t be reported on the income statement. On the balance sheet cash would increase by 1 200 and a liability called deferred revenue of 1 200 would be created. Deferred revenue is an aspect of what is called the accrual basis of accounting. Under the accrual basis of accounting revenues are recorded on the income statement when they are earned rather than received.