What is the difference between deferred revenue and unearned revenue? Explain with an example.

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Accepted Answer

Deferred revenue and unearned income are terms used interchangeably to describe the same concept.

Deferred revenue and unearned income refer to revenue received in advance for goods or services that have not yet been delivered or provided.
Both terms represent a liability on the company's balance sheet until the revenue is recognized.
Deferred revenue is commonly used in the software industry, where customers pay upfront for a subscription or license that spans multiple periods.
Unearned income is often used in the context of rental properties, where tenants pay rent in advance for a future period.
Once the goods or services are delivered or provided, the deferred revenue or unearned income is recognized as revenue on the income statement.
The recognition of revenue is typically done over the period in which the goods or services are delivered or provided.
Deferred revenue and unearned income are important for accurate financial reporting and revenue recognition.

Accepted Answer

Deferred revenue and unearned income are terms used interchangeably to describe the same concept.

Deferred revenue and unearned income refer to revenue received in advance for goods or services that ha...read more

Here's a closer look at each term:

Deferred Revenue: This term is commonly used in financial accounting. When a company receives payment in advance for a product or service that will be delivered or performed in the future, it records this amount as deferred revenue. It's considered a liability because it represents an obligation to the customer. As the company delivers the goods or performs the services, it gradually recognizes the deferred revenue as earned revenue.
Unearned Income: This term is another way of referring to deferred revenue. Like deferred revenue, unearned income refers to money received before goods have been delivered or services performed. It's also recorded as a liability on the balance sheet, and is gradually moved to the income statement as the goods or services are delivered.

In short, whether you call it deferred revenue or unearned income, the concept is the same: it's money that has been received by a company for a promise of future goods or services, and it's recognized as revenue only when those goods or services have been delivered or performed.

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This is the biggest cheapest company in the world called British Telecom. Can you tell me the difference between receivables and deferred revenue? HR are beggars like bosses, there is a philosophy in conceptual framework called either cash basis or accrual basis! Historical is not applicable here. Dividends delayed and interest receivable? These are adjusting events into receivables. So where is the unearned revenue when revenue can be recognised still. Ill fire you all in HR!

Accepted Answer

Deferred income (also known as deferred revenue, unearned revenue, or unearned income) is, in accrual accounting, money received for goods or services which has not yet been earned.

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What is the difference between deferred revenue and unearned revenue? Explain with an example.

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