Glossary
Deferred revenue
M1.06 · M5.04Also called unearned revenue, contract liability, advance from customers.
Money collected before the service has been delivered, carried as a liability until it is earned.
A software firm that collected ₹24,00,000 for a year of service and has delivered three months carries ₹18,00,000 of deferred revenue.
The balance is one of the few genuinely forward-looking items on a balance sheet. Growing deferred revenue means customers are committing further ahead, and a falling balance at a subscription company is a revenue decline that has not yet reached the income statement.
Read the change in the balance beside reported revenue growth.