Deferred Revenue – Definition & Example

Deferred revenue (also known as unearned revenue) is the income which has been received but the product/ service is yet to be delivered to customer.

As this is the amount which has been received in advance, this is treated as current liability (If the agreement is to provide goods/ services within a year) and shown on liability side of a balance sheet.

This becomes income when the order is fulfilled and product or service is delivered to customer.

Examples of deferred revenue:

Unearned revenue is most common for companies which provide software services to its customer and charge upfront amount.

Rent received in advance, prepayment for subscription for newspaper are the other examples of unearned revenue.