Deferred income

Deferred income is the converse of accruals. It is income received during an accounting period, but for which the company has not yet supplied the goods and services as at the end of the period, so which cannot be recognised as income. These amounts should not be included in the P & L for the period.

An item that gives rise to deferred income is the other side of a prepayment. Where a buyer has a prepayment, its supplier will have deferred income.

Accruals and deferred income are often shown as a single balance sheet item. Some companies disclose them separately, which is useful for financial modelling, because it makes future revenues more visible.

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