Journal Entry for Deferred Revenue

Deferred Revenue is the income received in exchange for goods that are yet to be delivered. Deferred Revenue is also known as Unearned Income or Unearned Revenue. Deferred revenue journal entry is passed to record the advance payments received for goods and services. In this case, the balance for cash/bank (debit balance) increases due to the inflow of income, and the balance for deferred revenue (credit balance) i.e. liability increases.

Deferred Revenue Journal Entry

Journal Entry:

Example 1:

Advance payment of ₹20,000 received in cash by XYZ Ltd. Record the necessary journal entry in the books of XYZ Ltd.

Solution:

Example 2:

Spotify received a year's advance payment for the subscription, amounting to ₹2,000. Record the necessary journal entry in the books of Spotify.

Solution: