imported>Doug Williamson |
imported>Doug Williamson |
| Line 1: |
Line 1: |
| ''Financial reporting - balance sheet - liabilities - accruals accounting''.
| | European Securities and Markets Authority. |
| | |
| Deferred income is amounts for services for which payment has been received by the business, but which has not yet been earned.
| |
| | |
| It is a liability that recognises our obligation to provide services in the future, for which we have already been paid.
| |
| | |
| | |
| :<span style="color:#4B0082">'''''Example: Five-year licence'''''</span>
| |
| | |
| :Our business is providing services under five-year licences, payable by our customers in advance.
| |
| | |
| :Our accounting year runs from 1 January to 31 December.
| |
| | |
| :One of our customers has paid us in advance - at the start of January - for a five-year licence.
| |
| | |
| :We recognise the revenue in our income statement spread over the full five years.
| |
| | |
| :At the end of the first year, 4/5 of the total received from the customer is Deferred income.
| |
| | |
| :We have a liability / obligation to provide a further four years of service, for which we have already been paid in advance.
| |
| | |
| | |
| Deferred income is recorded as a credit balance in the balance sheet.
| |
| | |
| (The related accounting entries for the initial receipt being
| |
| | |
| :DEBIT Cash asset in the balance sheet and
| |
| | |
| :CREDIT Deferred income liability in the balance sheet.)
| |
| | |
| | |
| Deferred income is a liability of the reporting entity to provide the services that the customer has already paid for.
| |
| | |
| | |
| For reporting presentation purposes it is often aggregated with Accruals, as 'Accruals and deferred income'.
| |
| | |
| | |
| As the deferred income is earned in subsequent reporting periods, the amount remaining in the balance sheet is reduced, and the income is recognised in the Income statement.
| |
| | |
| The related accounting entries are:
| |
| | |
| :DEBIT Deferred income in the balance sheet, reducing the remaining net credit balance;
| |
| | |
| :CREDIT Revenue in the income statement.
| |
|
| |
|
|
| |
|
| == See also == | | == See also == |
| * [[Accrual]] | | * [[EMIR]] |
| * [[Accruals accounting]] | | * [[European Securities and Markets Authority]] |
| * [[Accrued expense]]
| |
| * [[Accrued income]]
| |
| * [[Balance sheet]]
| |
| * [[Credit]]
| |
| * [[Debit]]
| |
| * [[Financial reporting]]
| |
| * [[Income statement]]
| |
| * [[Liabilities]]
| |
| * [[Licence]]
| |
| * [[Prepayment]]
| |
| * [[Reporting entity]]
| |
| * [[Revenue]]
| |
| | |
| [[Category:Accounting,_tax_and_regulation]]
| |
