Editing Deferral (section)

==Deferred revenue==
'''Deferred revenue''' (or '''deferred income''') is a [[liability (accounting)|liability]] representing cash received for goods or services that will be delivered in a future [[accounting period]]. Once the income is earned, the corresponding [[revenue]] is recognized, and the ''deferred revenue'' liability is reduced.<ref>John Downes, Jordon Elliot Goodman, Dictionary of Finance and Investment Terms 1995 Barron Fourth Edition {{ISBN|0-8120-9035-7}} page 630</ref> Unlike ''accrued expenses'', where a liability is an obligation to pay for received goods or services, deferred revenue reflects an obligation to deliver goods or services for which payment has already been received.<ref>Kimmel, P.D., Weygandt, J.J., & Kieso, D.E. (2011). Accounting: Tools for Business Decision Making. 4th Edition. Hoboken: John Wiley & Sons, Inc.</ref>

For example, if a company receives an annual [[software license]] fee upfront on January 1 but its [[fiscal year]] ends on May 31, the company using accrual accounting would only recognize five months' worth (5/12) of the fee as [[revenue]] in the current fiscal year's [[profit and loss statement]]. The remaining amount is recorded as ''deferred income'' (a liability) on the [[balance sheet]] for that year.