Deferred revenue is a liability on a company's balance sheet that represents money received for goods or services that have not yet been delivered or performed. This means the company has an obligation to provide the product or service in the future, even though it has already received payment. When a business collects payment in advance, it cannot recognize that income until the service is completed or the product is delivered. This accounting practice ensures that revenue is matched with the expenses incurred to earn it, following the matching principle in accounting.