Does Deferred Revenue Go On The Income Statement

Deferred revenue is generated when a company receives payment for goods and or services that it has not yet earned.

Does deferred revenue go 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. It appears on your cash flow statement for april in the operating section as a 50 000 increase in cash. It also appears on your company s month ending balance sheet as deferred revenue. Deferred revenues are received cash deposits that a company has collected but not yet reported as revenue on the income statement.

In accrual accounting revenue is only recognized when it is earned. After the service is provided decreasing deposit deferred income and increasing the revenue account. Deferred revenue is listed as a liability on the balance sheet because under accrual accounting the revenue recognition process has not been completed. Deferred revenue is an aspect of what is called the accrual basis of accounting.

On the annual income statement the. If your law firm receives a 50 000 retainer in april from a corporate client that 50 000 does not yet show on april s income statement. As they are reported as revenue in subsequent quarters i e. If a customer pays for good services in advance the company does not record any revenue on its income statement and instead records a.

Similarly this will impact the cash flow statement of the company. This money has not been earned and thus can t be reported on the income statement. This contrasts with the cash basis of accounting wherein the opposite is true. Deferred revenue recognition in a 2 way step.