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.

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RELATED FAQS
  1. What are some examples of deferred revenue becoming earned revenue?

    Understand specific examples when a company's deferred revenue is converted to earned revenue, and learn the principles behind ... Read Answer >>
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    Learn what types of companies tend to have the highest levels of deferred revenue. Understand when deferred revenue is recognized ... Read Answer >>
  3. How is deferred revenue treated under accrual accounting?

    Learn deferred revenue and its treatment under accrual accounting and why various revenue recognition methods result in different ... Read Answer >>
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    Find out when U.S. companies are allowed to hold deferred tax assets and report them in the financial statements according ... Read Answer >>
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    Learn about how deferred tax liabilities arise, when they must be reported in the financial statements, and how a company ... Read Answer >>
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