Income received during an accounting period for goods and services not yet supplied.... more on: Deferred income
(Also known as “Subscription liability”) Subscription payments made by subscribers to publishers in advance of issues being sent, and accounted for in the publisher's Balance Sheets. After each issue is released a proportion of deferred income is transferred to the publisher's Profit & Loss account (see also “Earned income”). The accounting is as follows: Earned income + Deferred income = Total subscription price.
Income, received in advance, which is not earned income until a later fiscal period.
a liability that arises when a company is paid in advance for goods or services that will be provided later. For example, when a magazine subscription is paid in advance, the magazine publisher is liable to provide magazines for the life of the subscription. The amount in deferred income is reduced as the magazines are delivered.
Income received in advance of it being earned and recognized
Income received but not earned until all events have occurred. Deferred income is reflected as a LIABILITY.
Funds that have been collected but have yet to be earned, usually due to restrictions in time or requirement of deliverable results. For example, a customer pays their annual software license upfront on the 1st Jan. As the company financial year-end is 31st May, the company would record five months of the income as turnover in the profit and loss account. The rest would be accrued in the balance sheet as a "deferred" creditor.
Deferred income is income for which the cash has been collected by the company, but has yet to be earned. For example, a customer pays his/her annual software license upfront on the January 1. However the company financial year-end is May 31, the company would only be able to record five months of the income as turnover in the profit and loss account.