Deferred Revenue

Deferred revenue (or unearned revenue) represents payments a company receives for goods or services it has not yet delivered. It’s recorded as a liability on the balance sheet until the product or service is provided.

Examples:

• Annual SaaS subscription fees paid upfront.

• Event ticket sales collected before the event.

• Deposits for future product deliveries.

Accounting Treatment:

• Recorded as a liability when received.

• Recognized as revenue progressively when earned.

Example:

A Dubai-based software company receives AED 500,000 in advance annual subscription payments. Until services are rendered monthly, the AED 500,000 is classified as deferred revenue and recognized as income over 12 months.