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Also known as: unearned revenue, customer deposits

Deferred Revenue

ConceptualFinanceMetrics

Definition

Deferred Revenue: Deferred revenue is cash received for goods or services not yet delivered—a liability on the balance sheet representing the obligation to deliver. Common in subscription businesses with annual prepayments. Deferred revenue converts to recognized revenue as services are delivered over time.

Example Usage

“We have $600K in deferred revenue from annual prepayments. It converts to $50K monthly recognized revenue over 12 months.”

Common Misconceptions

Deferred revenue is revenue. It's a liability until earned; premature recognition violates GAAP.
More deferred revenue is bad. It's actually positive—it means customers paid upfront and you have cash.
Deferred revenue only matters for accounting. It affects key metrics, cash management, and company valuation.

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