Deferred revenue
Financial Accounting glossary · The Accounting Cycle & Financial Statements
Definition
Cash received before the related performance obligation is satisfied; a liability.
Deferred revenue in plain English
Deferred revenue is money a company has ALREADY collected but hasn't actually earned yet, because it still owes the customer something. Even though the cash is in the bank, it counts as a liability — a promise to deliver — until the work is done or the product is handed over. Think of a gym that charges you $600 for a year up front: on day one they have your $600, but they haven't given you the year of workouts yet, so they "owe" you that service. Each month, as they provide it, a slice of that $600 finally turns into real earned revenue.
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