Deferred Revenue
Payments received from customers before goods or services are delivered, recorded as a liability until the revenue is earned through performance obligations.
Deferred Revenue
A liability representing payment received for goods or services that have not yet been delivered or performed, also called unearned revenue.
For example, when a software company collects $120,000 upfront for an annual subscription, it initially records this as deferred revenue and then recognizes $10,000 of revenue each month as services are provided.
Deferred revenue represents a cash flow advantage but creates an obligation to deliver future goods or services. It appears as a liability on the balance sheet (current or non-current depending on when performance will occur) and only becomes revenue on the income statement as performance obligations are satisfied over time.