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Deferred Revenue

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What is deferred revenue?

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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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How do I classify revenue that has not yet been earned?

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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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What is the difference between deferred revenue and accrued revenue?

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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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How Do You Calculate Deferred Revenue?

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Deferred Revenue = Sum of all payments received for undelivered services or products.