Deferred income

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.[1]

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.

See also

References

  1. ^ John Downes, Jordon Elliot Goodman, Dictionary of Finance and Investment Terms 1995 Barron Fourth Edition ISBN 0-8120-9035-7 page 630

Wikimedia Foundation. 2010.

Игры ⚽ Нужна курсовая?

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 tax — ➔ income tax …   Financial and business terms

  • Deferred Income Tax — A liability recorded on the balance sheet that results from income already earned and recognized for accounting, but not tax, purposes. Also, differences between tax laws and accounting methods can result in a temporary difference in the amount… …   Investment dictionary

  • deferred income — See: deferred credit …   Accounting dictionary

  • deferred income — See deferred credit …   Big dictionary of business and management

  • Deferred income tax — (liability)   A liability in the balance sheet representing the additional Federal income taxes that would have been due if a utility had not been allowed to compute tax expenses differently for income tax reporting purposes than for ratemaking… …   Energy terms

  • deferred income tax — An asset or liability that arises on timing differences between *income (definition 2) calculated under *Generally Accepted Accounting Principles and income calculated according to *taxation rules. See also *temporary differences and *permanent… …   Auditor's dictionary

  • deferred income — An alternative term for *unearned revenue …   Auditor's dictionary

Share the article and excerpts

Direct link
Do a right-click on the link above
and select “Copy Link”