Deferred Revenue

Deferred revenue, also called unearned revenue or customer deposits, is money that you received for products or services you haven’t delivered yet. With accrual-based accounting, you don’t recognize the revenue until you’ve fulfilled your side of the transaction.

Deferred Revenue is a term used in accounting to describe income received by a business in advance for goods or services that are yet to be delivered. It represents a liability on the company's balance sheet, as the revenue has been received but not yet earned. Small business owners often encounter deferred revenue when they receive upfront payments or deposits from customers for future products or services. It is crucial for businesses to properly account for deferred revenue to ensure accurate financial reporting and to comply with accounting standards. Understanding and managing deferred revenue helps small business owners monitor their financial health and make informed decisions about revenue recognition and cash flow management.