E N D
Deferred Revenue Journal Entry A business can earn revenue from its services immediately recorded onto the books. Revenue is any income earned by the sale of products or services. Traditionally, the income is received only after the product has been sold or the services have been delivered. Sometimes the client may pay up in advance before the products or services are delivered. In such cases, you may need to learn about deferred revenue. A Brief Explanation Of Deferred Revenue Every time the customer pays in advance, the income cannot be recorded as revenue. Instead, it will be considered deferred revenue and placed under the balance sheet’s liability side. Even though the move seems unfair from a business perspective, some rational reasons exist. As the payment for the services or products is not ethically earned by the company, it cannot be held as revenue and recorded under the assets section. However, deferred revenue can be altered as soon as the services or products are delivered in good condition. The deferred revenue can be earned in instalments or completely, depending on the nature of the service. The outline for deferred revenue is explained in the pointers below. When the company receives an advance payment, it is not deemed as earned. This is why it must not be confused with general revenue. The amount becomes a liability because it is an advance payment acquired by the company without providing the goods or services. The deferred revenue can only be earned by paying off the debt of goods or services. Contact us Email: - hello@profitjets.com Mobile: - 4696145050 Address: - 2803 Philadelphia Pike Suite B #205 Claymont, DE 19703 Visit us: - https://profitjets.com