Deferred revenue is a liability that represents money received by a business for goods or services that have not yet been delivered or performed. This occurs when a company receives payment in advance, recognizing the revenue only when it fulfills its obligation to provide the product or service, aligning with the principles of accrual accounting. Deferred revenue ensures that income is recorded in the period in which it is earned, rather than when cash is received, which reflects a more accurate financial position of the business.
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