Deferred Revenue

Tax Glossary Definition

Deferred Revenue

Deferred Revenue – Deferred revenue, also known as unearned income, represents funds a business receives in advance for goods or services yet to be delivered. Because the company still owes the customer the product or service, the amount is initially recorded as a liability and gradually recognized as revenue as the obligation is fulfilled.

Example: If a software firm receives ₹1,00,000 upfront for an annual subscription, it records the payment as deferred revenue and recognizes one-twelfth of it as income each month.

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