Deferred Revenue

Deferred revenue, also known as unearned revenue, refers to payments a business receives before delivering goods or services. For instance, if a customer pays for a one-year subscription upfront, the company records this amount as deferred revenue. It represents a liability on the balance sheet because the company still owes the customer the service for the remaining months. As the company delivers the service over time, it gradually recognizes this revenue in its income statement, reflecting the work completed. Essentially, it’s money received for future services or products yet to be provided.