Deferred Revenue

Deferred Revenue

Deferred revenue, also known as unearned revenue is any amount which is earned before the actual revenue is reported. The revenue is deferred to a later date when actual services are performed and hence the name - deferred revenue. Deferred revenue should be identified and shown as an asset until the revenue is recognized in the book of accounts.

For example, a business owner wishes to import machinery worth 100000$ from USA. The overseas vendor may request part of the sale amount as an advance for processing the order. Lets assume 10000$ was requested as an advance. This amount will be shown as an asset and then reduced when the invoice is issued and the machinery is received.

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