- Deferred income
Deferred income (also known as deferred revenue, unearned revenue, or unearned income) is, in accrual accounting, money received for goods or services which have not yet been delivered. According to the revenue recognition principle, it is recorded as a liability until delivery is made, at which time it is converted into revenue.
For example, a company receives an annual software license fee paid out by a customer upfront on January 1. However the company's fiscal year ends on May 31. So, the company using accrual accounting adds only five months worth (5/12) of the fee to its revenues in profit and loss for the fiscal year the fee was received. The rest is added to deferred income (liability) on the balance sheet for that year.
Deferred income shares characteristics with accrued expense with the difference that a liability to be covered later are goods or services received from a counterpart, while cash is to be paid out in a latter period, when such expense is incurred, the related expense item is recognized, and the same amount is deducted from accrued expenses.
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Look at other dictionaries:
deferred income — ➔ income * * * deferred income UK US noun [U] ► ACCOUNTING DEFERRED CREDIT(Cf. ↑deferred credit) … Financial and business terms
deferred income — n: current income forgone to produce a later higher income (as at retirement) Merriam Webster’s Dictionary of Law. Merriam Webster. 1996 … Law dictionary
deferred income — noun : current income forgone to produce a later higher income (as at retirement) * * * deferred income, Accounting. income received or placed on record before earned or due, such as rent payments received in advance … Useful english dictionary
deferred income — See: deferred credit … Accounting dictionary
deferred income — See deferred credit … Big dictionary of business and management
deferred income — An alternative term for *unearned revenue … Auditor's dictionary
deferred income tax — ➔ income tax … Financial and business terms
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