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Hello guys, how are you? hope you are ok. please define for me what deferred income is and why is recorded under liabilities on the face of statement of financial position.
Its the same as prepaid income, or income received in advance.
Suppose you are charging someone rent. Your year end is 31 December and the customer pays you a years rent for the year 1 July 2015 to 30 June 2016.
As at 31 December 2015 only half the rent was earned in 2015 and so only half is shown as revenue. The other half is for 2016 and so at 31 December 2015 it is shown as a civility – it is effectively owed back to the customer. Obviously it won’t be paid back to the customer and will be shown as revenue in 2016.
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