Deferred Revenue concept and its entries

Question

Accepted Answer

Deferred revenue is a concept where revenue is received in advance but recognized as income over time as the goods or services are delivered.

Deferred revenue is a liability on the balance sheet until it is earned.
When revenue is received in advance, it is recorded as a debit to cash and a credit to deferred revenue.
As the goods or services are delivered, the deferred revenue is recognized as income by debiting deferred revenue and crediting revenue.
Examples of deferred revenue include prepaid subscriptions, advance payments for services, and gift cards.
Deferred revenue is important for accurate financial reporting and matching revenue with expenses.

Accepted Answer

Deferred revenue is a liability on a company's balance sheet that represents a prepayment by its customers for goods or services that have yet to be delivered. It is also known as unearned revenue or unearned income.

The journal entry to record deferred revenue is:

Cash/Bank Account......Dr

To Deferred Revenue Account......Cr

Once the goods or services have been delivered, the company can recognize the revenue and record an adjusting entry to reduce the deferred revenue balance. The adjusting entry is:

Deferred Revenue Account......Dr

To Revenue Account.......Cr

Accepted Answer

advance payments a company receives for products or services that are to be delivered or performed in the future

1)When advance received from customer A

Bank account Dr

To A account Cr

2)transfer entry to unearned revenue

A account Dr

To Unearned revenue account Cr

Deferred Revenue concept and its entries

Top Consero Global Solutions Senior Accounting Specialist interview questions & answers

Top HR questions asked in Consero Global Solutions Senior Accounting Specialist