Deferred Income

Deferred income, also known as unearned revenue, is money a company receives before delivering the goods or services. It’s recorded as a liability on the balance sheet because the company still owes the customer. Once the product or service is provided, the income is recognized as revenue. For example, if you pay in advance for a yearly magazine subscription, the publisher records that money as deferred income until they deliver each issue over time. This accounting ensures revenue is matched with the periods when the related goods or services are actually provided.