deferred revenue

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monia

monia (Querist)
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19 July 2011 Hi,

What is deferred revenue and journal entry and how it impacts on accounts?

thanks
Satish Kumar

C A S.S.Agarwal, M.Com.,LL.B,

C A S.S.Agarwal, M.Com.,LL.B, (Expert)
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20 July 2011 Deferred revenue is the expenses which is spread over for 2 to 5 years. Say advertisement expenses incurred during the year of which 25% related for the year 50% for next year and balance 25% for 3rd year. The payment of 1000000 has been made during the year.

The entry will be
Advertisement Dr. 250000
Deferred Revenue Dr. 750000
To Bank

In next year Advertisement will be debited by 5,00,000 and deferred revenue will be credited with 500000 and in the similar manner in the 3rd year the same entry is to be passed.

monia

monia (Querist)
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21 July 2011 Hi Sir,

Don't mind. I am not agree with this answer. As per my understanding it shouled be cash received but service not provided so it is current liablity and it will be shown in balance sheet in liablity side.
Entry
Cash dr
unearned revenue cr

next year or month
unearned revenue dr
service fee cr

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