Deferred revenue is a liability on a company's balance sheet that represents a prepayment by its customers for goods or services that have yet to be delivered. Deferred revenue is recognized as earned revenue on the income statement as the good or service is delivered to the customer.

Is deferred revenue recognized as revenue?

Accounting for Deferred Revenue

Since deferred revenues are not considered revenue until they are earned, they are not reported on the income statement. Instead they are reported on the balance sheet as a liability. As the income is earned, the liability is decreased and recognized as income.

What is the entry to recognize deferred revenue?

Deferred revenues reflect situations in which money has been received, but goods and services haven't been provided. ... The journal entry to recognize a deferred revenue is to debit or increase cash and credit or increase a deposit or another liability account.