The deferred revenue definition is unearned revenue. Most of the time, it is the revenue that you collect through your business before actually earning anything. It can be upfront for any of your services. It can even be an advance booking to stay at your place and have food. Many times deferred revenue can also be made through legal services. If someone would pay an advance for any legal service then that amount would be counted as deferred revenue. It would not be included in earned revenue only when the entire service charge would be received by the customer. Here we would know about the deferred revenue in details:
The Work Of Deferred Revenue Under Accrual Accounting:
If your work includes a cash basis then the deferred revenue would not be an issue for you. In this case, you would earn whenever the payment would be transferred to your account. If you always follow the accrual accounting then you have to save the deferred revenue for later. You can enjoy the amount once you would serve the entire service to your customer.
Is Deferred Revenue A Liability?
Is deferred revenue a liability? Well, this is a confusing segment but if you would do all the research then you would find that deferred revenue is definitely a liability. No matter if you have to save for later but it is the money that you deserve. If you are sure about the service or if your work doesn’t allow refunds then you can count the deferred revenue as a liability. This would not be the case always as clients can ask for refunds or return anytime.
About Accounting For The Deferred Revenue:
Deferred revenue definition would be simple for you while you would understand about accounting the deferred revenue. Here you would ask for the advance but that would not be counted as your earned amount. You have to keep that advance amount untouched until you provide the customer with the service. Once your customer would be done with the complete service then you can include the advance fees with your entire income.
Let Us Know About The Business That Deals With The Deferred Revenue:
If you are into a business that always asks for advance then you would be able to get deferred revenue. If you are still wondering what is deferred revenue then it is simply the asked advance from the customer. If you are into the job of a consultant or even if you are into any service proving job then you can always fix booking fees. This would always make sure that you collect deferred revenue for the work that you do. The business that includes prepaid services is the best example here.
