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What is the difference between deferred income and accrued income? Any example for that?
Revenue received in advance = deferred income
Revenue earned but not yet received = accrued income
Adopted from article ‘Revising for the September 2020 exam session’
On 1 September 20X9, Burnett Co decided to undertake a crowdfunding campaign to finance the production of a new racing bike, the Cracken. They made a short film with famous cyclists which set out the qualities of the Cracken bike and posted it on the PeddleStarter crowdfunding platform. The campaign raised $4 million on which PeddleStarter charged 7% commission. The contributors to the crowdfunding campaign were promised a reward of 1 Cracken bike for every $4,000 dollars contributed. At the financial year end of 31 December 20X9, Burnett Co had manufactured only 50 Cracken bikes at a total cost of $240,000 but none had been delivered to contributors. There was some doubt as to the capability of the company to develop, manufacture, and deliver the bikes promised but Burnett Co is sure that the funding will cover any costs incurred.
At 31 December 20X9,
Revenue = $520,000 ($240,000 + commission $280,000)
Accrued revenue = $3,480,000How do we determine in this case, it is accrued revenue, but not deferred revenue as we might fail to deliver to bikes to contributors.
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Is accrued income a receivable?
I would have called it deferred revenue – I think it’s a liability. Is that your view? I suspect the words are sometimes used interchangeably.
I think it is a deferred revenue as well, cause
Dr Bank $4m
Cr Revenue $520,000
Cr Deferred revenue $3,480,000Used interchangeably, I would assume! Thank you.
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