Fundamental Glossary / Financial Statements
Deferred Revenue
Cash collected from customers before the company has delivered the goods or service. A liability, not profit yet.
Formula
Dr cash, Cr deferred revenue. Revenue is recognised, and the liability falls, as the performance obligation is met.
What it means
Deferred revenue, also called unearned revenue or contract liabilities, is common in subscriptions, maintenance contracts, tuition, and advance bookings.
It is a good liability. The company holds the cash and owes a service rather than a repayment in the ordinary course.
How to read it
A growing deferred-revenue balance supports future reported revenue. Billings that run ahead of recognised revenue are a demand signal in software and services.
What to watch
Recognising deferred revenue too early inflates current profit and shrinks the liability. The revenue-recognition note, and any restatement, is the place to check the pace.
This note explains the term. It is not a research recommendation, a target price, or a comment on any security. Ratios and regulatory thresholds change; use the latest filing or circular for a live figure.