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Question

What is the journal entry for deferred revenue?


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Solution

A deferred revenue account is a liability for a company as shown on the liability side of the balance sheet. It is a payment made by the customers to a company for the goods and services that are yet to be delivered by the company. For example, ‘A’ company is a retail store that delivers candy; a customer pays rupees 180 as a subscription yearly. So 1/12th of deferred revenue becomes income revenue each month, that is 15 rupees. Below is the journal entry for deferred revenue.

Date

Account

Debit

Credit

1/10

Cash account …………………………..Dr.

180.00

To deferred revenue account.

180.00

(being paid for a candy subscription)

Date

Account

Debit

Credit

1/10

Deferred revenue……………………….Dr.

15.00

To revenue

15.00

(being one month of candy subscription)

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