What Is Deferred Revenue?

By Adam Levy – Updated Apr 9, 2025 at 9:12 AM EST

Key Points

Deferred revenue is recorded when payment is received before services are delivered.
It helps companies show a more accurate financial state under GAAP rules.
Growing deferred revenue typically indicates a business is expanding successfully.

Deferred revenue is a liability on a company's balance sheet. It shows the amount the business has received from customers for products or services it hasn't delivered yet.

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Liability

When it comes to evaluating a business, a liability is really just a one-word description of what a company owes to other parties.

When a company receives advance payment, it adds to its cash holdings and offsets that amount on its balance sheet with deferred revenue, or "unearned revenue," until it delivers the product or service. At that point, it can remove the liability from the balance sheet and record the unearned revenue as revenue on its income statement.

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Balance sheet with a fountain pen and glasses lying on top. — Source: Getty Images.

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Revenue vs. Profit: What's the Difference?

These two numbers differ but are both important when evaluating a stock.

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GAAP vs. Non-GAAP: Everything You Need to Know

Public companies must use generally accepted accounting principles but also at times do their own thing.

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About the Author

Adam Levy is a contributing Motley Fool stock market analyst covering technology, consumer, and financial stocks and how policy, economic, and consumer trends shape personal finance, Social Security and retirement savings. Before The Motley Fool, Adam was a financial advisor at Edward Jones. He studied finance and electrical engineering at Carnegie Mellon University.

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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Adam Levy has positions in Amazon. The Motley Fool has positions in and recommends Amazon. The Motley Fool has a disclosure policy.