Deferred Income
Deferred Income refers to money that a business has received for goods or services that have not yet been delivered or performed. This income is recorded as a liability on the balance sheet because the company still owes the customer the product or service.
Once the goods or services are provided, the deferred income is recognized as revenue. This accounting practice ensures that income is recorded in the correct period, aligning with the Revenue Recognition Principle, which helps maintain accurate financial statements.