deferred revenue also known as unearned revenue refers to advance payments a company receives for products or services that are to be delivered or performed in the future the company that receives the prepayment records the amount as deferred revenue a liability on its balance sheet 
deferred revenue is a liability because it reflects revenue that hasn t yet been earned and it represents products or services that are owed to a customer it s recognized proportionally as revenue on the income statement as the product or service is delivered over time 1investopedia ryan oakley