Deferred revenue, often known as deferred income or unearned revenue, is a company's responsibility for money received but not yet earned. A corporation receives it for sold but uncompleted goods or services.
A company that sells annual subscriptions may take payment up in advance even when the service has not yet been offered for the year. The company would withhold money until the service is given.
Deferred revenue matches revenue with product or service expenditures. Deferred revenue is a measure of temporality, not profitability since it will be recognized when the service or product is provided.
Deferred revenue can predict revenue growth. A corporation with much-deferred revenue may have several unknown potential revenue sources.
Deferred revenue must be managed and recognized properly by companies. Companies can use accrual accounting to record revenue and match it with costs.