Deferred Revenue On The Income Statement

Deferred revenue recognition in a 2 way step.

Deferred revenue on the 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. Money your company earns from selling goods or services goes into your books as revenue. Deferred revenue or unearned revenue refers to advance payments for products or services that are to be delivered in the future. After the service is provided decreasing deposit deferred income and increasing the revenue account.

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. Deferred revenue is an aspect of what is called the accrual basis of accounting. How deferred revenue is reported on the cash flow statement the cash flow statement tracks the cash coming into and going out of the company over the period.

Increasing the cash and increasing deposit deferred income on the liability side. Similarly this will impact the cash flow statement of the company. On september 1 the company would record revenue of 100 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.

On august 1 the company would record a revenue of 0 on the income statement. The difference between revenue on an income statement and deferred revenue on a cash flow statement.