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Deferred revenue is a liability account on a balance sheet that represents revenue that has been received but not yet earned. It arises when a company receives payment for goods or services that it has not yet delivered or performed.
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If revenue has been received, but the company has not yet fulfilled its obligation to provide the corresponding goods or services, then it is considered deferred revenue. If the company expects to provide the goods or services beyond one year, the deferred revenue may be classified as a long-term liability.
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It's important to note that deferred revenue is not the same as accrued revenue, which is revenue that has been earned but not yet received. Accrued revenue is recorded as an asset on the balance sheet, whereas deferred revenue is recorded as a liability.
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Deferred Revenue = Sum of all payments received for undelivered services or products.