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What is deferred revenue

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A deferred revenue expenditure, also known as a prepaid expense, is a cost that an organization pays for at once but receives benefits in the future. Examples include insurance premiums, rent and advertising expense that companies pay for at the beginning of a year or quarter.


U.S. generally accepted accounting principles and international financial reporting standards require that organizations report a deferred revenue expenditure at market value on the day of the transaction. To record a prepaid expense, an accountant debits the prepaid expense account and credits the vendor payables account.

Financial Reporting

U.S. GAAP and IFRS require that organizations report deferred revenue expenditures as short-term assets in the balance sheet, also called the statement of financial condition or statement of financial position.



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