Deferred Revenue

Money a company has received for goods or services it hasn't delivered yet.

Deferred revenue, also called unearned revenue, is recorded as a liability because the company still owes the customer a product or service. As the company delivers on its obligation over time, it gradually recognizes the cash as actual revenue on the income statement instead of holding it as a liability.

The software company recorded the annual subscription payment as deferred revenue, recognizing a bit of it each month.