Difference between deferred revenue and unearned income

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Accepted Answer

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

Deferred revenue and unearned income refer to money received by a company for goods or services that have not yet been delivered or rendered.
Both terms are used interchangeably, but deferred revenue is more commonly used in accounting while unearned income is more commonly used in taxation.
Deferred revenue is recorded as a liability on the balance sheet until the goods or services are delivered or rendered, while unearned income is recorded as income on the income statement but is subject to taxation.
Examples of deferred revenue or unearned income include prepaid rent, subscription fees, and advance payments for services.

Accepted Answer

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

Deferred revenue and unearned income refer to money received by a company for goods or services tha...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.

Difference between deferred revenue and unearned income

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