🤔Deferred revenue and unearned revenue are two accounting terms that are often used interchangeably to describe the same concept: receiving payment for goods or services that have not yet been delivered or performed.
However, if you want to be fussy, you can find some differences between the two, like those listed below.
🏢 Industry-Specific Use:
Deferred revenue may be more commonly used in industries such as software or subscriptions;
Unearned revenue may be more commonly used in industries such as construction.
💡 Revenue Recognition Method:
Deferred revenue is recognized on a straight-line basis over the course of the subscription period;
Unearned revenue is recognized based on the percentage of completion method as the project progresses.
⏰ Recognition Timing:
Deferred revenue is recognized as revenue at a later point in time, after certain conditions have been met;
Unearned revenue is recognized as revenue when the goods or services are delivered or performed.
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