Deferred Credit


DEFINITION of 'Deferred Credit'

Income that is received by a business but not immediately reported as income. Typically, this is done on income that is not fully earned and, consequently, has yet to be matched with a related expense. Such items include consulting fees, subscription fees and any other revenue stream that is intricately tied to future promises. For example, a book club might defer income from a two-year membership plan until all the costs of procurement and shipping are assessed. Also known as deferred revenue or deferred income.

BREAKING DOWN 'Deferred Credit'

Deferred credit is used largely for bookkeeping purposes and as a means to even out, or "smooth" financial records and give a more accurate picture of business activities. Using the previous example of a book club, if all membership or subscriptions fees just happened to come in during the first quarter and all products were shipped out in the second, the quarter-to-quarter income statement would obviously be skewed.

  1. Revenue

    The amount of money that a company actually receives during a ...
  2. Income

    Money that an individual or business receives in exchange for ...
  3. Deferred Revenue

    Advance payments or unearned revenue, recorded on the recipient's ...
  4. Deferred Compensation

    An amount of earned income that is payable at a later date. Most ...
  5. Accounts Receivable - AR

    Money owed by customers (individuals or corporations) to another ...
  6. Accountant

    A professional who performs accounting functions such as audits ...
Related Articles
  1. Retirement

    The Essentials Of Corporate Cash Flow

    Tune out the accounting noise and see whether a company is generating the stuff it needs to sustain itself.
  2. Active Trading

    An Introduction To Depreciation

    Companies make choices and assumptions in calculating depreciation, and you need to know how these affect the bottom line.
  3. Markets

    Operating Cash Flow: Better Than Net Income?

    Differences between accrual accounting and cash flows show why net income is easier to manipulate.
  4. Investing Basics

    How To Efficiently Read An Annual Report

    Annual reports are clearly prepared without any intent to deceive or mislead investors. Still, investors should read them with a dose of skepticism.
  5. Investing Basics

    Explaining Financial Statement Analysis

    Financial statement analysis is the process of reviewing a company’s statements to gain an understanding of its financial health.
  6. Investing Basics

    How Financial Statements Are Manipulated

    Financial statement manipulation is an ongoing problem, and investors who buy stocks or bonds should be aware of its signs and implications.
  7. Investing Basics

    How To Decode A Company’s Earnings Reports

    Earnings reports tell investors how a publicly-traded company is performing, but aren’t always easy to decipher.
  8. Investing News

    Defensive Investing: Learn from a Hedge Fund Pro

    Looking for ideas on companies, sectors or investments to short? Consider the opinion of this hedge fund luminary.
  9. Professionals

    5 Financial Careers You Didn’t Know Existed

    Discover some often overlooked financial career opportunities, and learn how accountants can catch the bad guy or rub elbows with Hollywood's elite.
  10. Professionals

    Common Interview Questions for Accountants

    Learn which job interview questions to prepare for to help advance your accounting career. Discover that what you do not say is as important as what you do say.
  1. Can working capital be depreciated?

    Working capital as current assets cannot be depreciated the way long-term, fixed assets are. In accounting, depreciation ... Read Full Answer >>
  2. Do working capital funds expire?

    While working capital funds do not expire, the working capital figure does change over time. This is because it is calculated ... Read Full Answer >>
  3. How much working capital does a small business need?

    The amount of working capital a small business needs to run smoothly depends largely on the type of business, its operating ... Read Full Answer >>
  4. What does high working capital say about a company's financial prospects?

    If a company has high working capital, it has more than enough liquid funds to meet its short-term obligations. Working capital, ... Read Full Answer >>
  5. How can working capital affect a company's finances?

    Working capital, or total current assets minus total current liabilities, can affect a company's longer-term investment effectiveness ... Read Full Answer >>
  6. What can working capital be used for?

    Working capital is used to cover all of a company's short-term expenses, including inventory, payments on short-term debt ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Quick Ratio

    The quick ratio is an indicator of a company’s short-term liquidity. The quick ratio measures a company’s ability to meet ...
  2. Black Tuesday

    October 29, 1929, when the DJIA fell 12% - one of the largest one-day drops in stock market history. More than 16 million ...
  3. Black Monday

    October 19, 1987, when the Dow Jones Industrial Average (DJIA) lost almost 22% in a single day. That event marked the beginning ...
  4. Monetary Policy

    Monetary policy is the actions of a central bank, currency board or other regulatory committee that determine the size and ...
  5. Indemnity

    Indemnity is compensation for damages or loss. Indemnity in the legal sense may also refer to an exemption from liability ...
  6. Discount Bond

    A bond that is issued for less than its par (or face) value, or a bond currently trading for less than its par value in the ...
Trading Center