YousrERP User Guide
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Deferred Revenue

Deferred Revenue (unearned revenue) is money received from a customer for goods or services that have not yet been delivered. In accrual accounting, revenue is recognized when earned, not when cash is received.

When to Use Deferred Revenue

  • Annual maintenance contracts paid upfront
  • Subscription services billed in advance
  • Retainer fees for future services
  • Prepaid service agreements

Setting Up Deferred Revenue

  1. Go to Accounting > Deferred Revenue and click New.
  2. Select the Company and the relevant Account.
  3. Link the Sales Invoice that contains the prepaid amount.
  4. Set the Service Start Date and Service End Date.
  5. The service period determines how the revenue is spread.
  6. Click Save.

How It Works

For a SAR 12,000 annual service contract:

On Receipt of Payment:

  • Debit: Bank SAR 12,000
  • Credit: Deferred Revenue (Liability) SAR 12,000

Each Month (for 12 months):

  • Debit: Deferred Revenue (Liability) SAR 1,000
  • Credit: Service Revenue (Income) SAR 1,000

This spreads the revenue recognition over 12 months, matching revenue to the period the service is provided.

Process Deferred Accounting

Use the Process Deferred Accounting tool to automatically book deferred revenue entries each period.