Deferred revenue
Deferred revenue is cash received from a customer before the related goods or services are delivered, recorded as a current liability rather than revenue until the performance obligation is fulfilled; also called unearned revenue.
FrameworkAccrual accounting
See it move
StreamFlix collects €120 upfront on 1 January for a 12-month subscription, recording it as deferred revenue, a liability, not revenue. By 31 January, one month has been delivered, so €10 shifts to subscription revenue, leaving a deferred revenue balance of €110 still owed as future service.
Check yourself
A software company receives €2,400 on 1 July for a twelve-month subscription. The company's financial year ends 31 December. How much subscription revenue should the income statement show for the six-month period to 31 December?