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Deferred Revenue

Deferred revenue is a payment that is made in advance of the completion of a contract. It is not considered “earned” and is recorded as a liability on the books until the terms of the contract are fulfilled. Accrued revenue is the opposite of deferred revenue, whereby revenue has been earned and recognized but not yet received. 

Deferred revenue is an important accounting concept for both ASC 606 and IFRS 15 revenue recognition models. Even though the business has increased cash flow, the revenue is not yet recognized because the terms of the contract have not been met.

Related terms

B2B Payments
B2B payments, short for Business-to-Business payments, refer to financial transactions that occur between companies. This is distinct from B2C (Business-to-Consumer) transactions where businesses sell goods or services directly to individual customers.
Billing
Billing is the process of generating invoices or bills to request payment from customers or clients for goods sold or services rendered. It is a fundamental aspect of business operations that involves documenting the details of transactions, calculating charges, and issuing invoices to customers for payment.
Billing Automation
Billing automation is the use of software to accelerate the billing process and eliminate manual workflows. This includes invoice creation, processing and delivery, payment tracking, subscription management and a variety of other tasks.
Configure, Price, Quote (CPQ) Software
CPQ stands for Configure, Price, Quote. It's a software application that helps businesses automate the process of generating sales quotes, especially for products or services with various configurations.
Consolidated Invoicing
Consolidated invoicing, also known as centralized billing or grouped invoicing, is a billing process in which multiple transactions or charges incurred over a specified period are combined into a single invoice for payment.
Credit Memos
A credit memo, also known as a credit memorandum or a credit note, is a document issued by a seller to a buyer. It acts like a voucher that reduces the amount the buyer owes.