Glossary
Revenue & Donations

Deferred Revenue

By: Alec Hollingsworth
Updated:  
June 2, 2025

DEFINITION:

Deferred revenue is money received by a nonprofit for services or events that will be delivered in the future, recorded as a liability until earned.
Deferred revenue, also known as unearned revenue, is income received by a nonprofit before the related goods or services have been provided or the event has occurred. This liability is recorded on the balance sheet until the organization fulfills its obligation, at which point the revenue is recognized on the income statement. Common examples include advance ticket sales for fundraising events, prepaid membership dues, or grant funds received ahead of the project start date. Properly tracking deferred revenue ensures accurate financial reporting and compliance with accounting standards, as it prevents overstatement of income in a given period.

Key Takeaways

  • Deferred revenue is recorded as a liability, not income.
  • It is recognized as revenue once obligations are fulfilled.
  • Common for advance ticket sales, dues, or grants.
  • Accurate tracking is crucial for compliance and reporting.

Why It Matters

Deferred revenue provides a true financial picture and ensures compliance by matching income to the period when services are delivered.

Real World Example

Imagine a nonprofit sells $10,000 in tickets in December for a gala occurring in February. When the money is received, it is recorded as deferred revenue (a liability) on the balance sheet, since the event hasn’t happened yet. Once the gala occurs in February, the nonprofit recognizes the $10,000 as revenue. This ensures the funds are reported in the correct accounting period and prevents inflating December’s income. Accurate tracking of such transactions is essential for compliance and provides clarity to stakeholders about the organization’s actual financial position.

How Aplos Helps

In Aplos, deferred revenue can be easily tracked through liability accounts, allowing nonprofits to properly recognize revenue only when obligations are met. This helps organizations maintain compliance with fund accounting standards and generate accurate financial reports.
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Frequently Asked Questions

What is deferred revenue in nonprofit accounting?

Deferred revenue is money received in advance for services, events, or projects that will be fulfilled in the future, recorded as a liability until earned.

How does deferred revenue affect financial statements?

Deferred revenue appears as a liability on the balance sheet and is only recognized as income once the related obligation is fulfilled.

How can Aplos help track deferred revenue?

Aplos allows nonprofits to set up liability accounts and manage deferred revenue, ensuring compliance and accurate financial reporting.

What are some common examples of deferred revenue?

Examples include advance ticket sales, prepaid membership dues, or grant funds received before the project starts.

Why is deferred revenue important for nonprofits?

It ensures income is recognized in the correct period, providing stakeholders with a clear and accurate financial picture.

Related Terms

Restricted Fund
Offerings
GAAP
Petty Cash
Nonprofit Corporation
Statement of Activities

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