Glossary · Bookkeeping & QuickBooks term
Deferred revenue
Money you’ve been paid before you’ve delivered the work — a liability, not revenue, until it’s earned. Recognized as income only as you deliver.
In plain terms
What deferred revenue means.
Deferred revenue (also called unearned revenue) is money a business has collected for goods or services it has not yet delivered. Under accrual accounting, it is recorded as a liability — an obligation to deliver — not as revenue. It becomes revenue only as the work is performed.
It is common wherever customers pay up front: annual subscriptions, retainers, prepaid services, deposits, and memberships.
Booking it as income overstates profit.
If a year’s prepaid subscription is recorded as revenue the day it’s collected, that month looks far more profitable than it is and the following eleven months look worse — and the business may owe tax on income it hasn’t truly earned. Recognizing deferred revenue correctly, over the delivery period, keeps each period honest.
Handling deferred revenue properly — recording the liability and recognizing it on schedule — is part of accurate accrual bookkeeping and a common correction in a cleanup for subscription and service businesses.
Put it to work
Collecting payment up front?
A Certified ProAdvisor sets up deferred-revenue tracking so your monthly profit reflects what you’ve actually earned — written fixed-fee scope.