About Deferred Revenue

Deferred Revenue is money collected in advance for services or products to be rendered in the future. This money does not actually represent revenue because it has not yet been earned, even though it may have already been received. Aptify provides the capability to track deferred revenue. Examples of deferred revenue products within Aptify include subscription products and membership dues. Deferred revenue is tracked in Aptify by debiting Accounts Receivable and crediting a Deferred Revenue account. While this Deferred Revenue account is considered a liability account, it differs from other liability accounts in that the money included is typically "worked off" instead of "paid off." This means that on a regular basis, portions of the money collected are earned.

For example, a subscription is sold for a monthly magazine, at a cost of $48 for an entire year. The full subscription fee is collected at the time of the order. In this case, because the product is a subscription, the Accounts Receivable account is debited, and the money is tracked as deferred revenue. 

Because the subscription is monthly, once per month the Deferred Revenue account is debited one-twelfth the cost of the subscription ($4), and the Sales account is credited for that amount. In this way, the money is credited to the sales account as it is "earned", not as it is received.