Does Deferred Revenue Go On The Balance Sheet

On the other hand the 800 is a liability because the company still has to deliver the remaining eight months of subscriptions.

Does deferred revenue go on the balance sheet. Effect of revenue on the balance sheet. Deferred revenue is listed as a liability on the balance sheet because under accrual accounting the revenue recognition process has not been completed. It is how deferred revenue on the balance sheet will look like. The remaining 800 is deferred revenue both an asset and a liability on a company s balance sheet.

Generally when a corporation earns revenue there is an increase in current assets cash or accounts receivable and an increase in the retained earnings component of stockholders equity. In the example from part 1 the company receives a 120 advance payment relating to a twelve month magazine subscription. Record the deferred revenue. How deferred revenue is reported on the balance sheet.

Then in recognition of the fact that the company still has an outstanding obligation to earn that money it adds an offsetting 40 000 under deferred revenue on the liabilities side of the balance sheet. On the one hand the 800 is an asset because the customer has already paid the company cash for it. As a result the company adds 40 000 to the cash total on the assets side of its balance sheet. Recording deferred revenue applies to the company s balance sheet.

The pattern of recognizing 100 in revenue would repeat each month until the end of 12 months when total revenue recognized over the period is 1 200. On the assets side of the balance sheet the. The company receives cash an asset account on the balance sheet and records deferred revenue a liability account on the balance sheet. On the balance sheet cash would be unaffected and the deferred revenue liability would reduce to 1 100 while net income of 100 would be added to retained earnings in shareholders equity.

The recipient of such prepayment records unearned revenue as a. Thus it will accrue its earning. Deferred revenue or unearned revenue refers to advance payments for products or services that are to be delivered in the future. The remaining 750 gets reported as both an asset and a liability on the balance sheet.

How does revenue affect the balance sheet. Hence 1000 of deferred income will be recognized as service revenue.