2 min read
Definition
Deferred income is money a business has been paid for goods or services it has not yet delivered. Because the work is still owed, it sits on the balance sheet as a liability, not yet as revenue.
In plain terms
Take an annual subscription paid upfront: you have the cash, but you have not earned it until the year passes. Each month, a slice moves from deferred income into revenue as you deliver.
Why it matters for your company
Deferred income explains why a cash-rich business may show modest revenue — the cash arrived before the earning. It matters for the matching principle and for reading subscription or prepaid-service businesses correctly.
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