The accounting glossary
What is deferred revenue?
Deferred revenue is an amount billed or received for goods or services that have not yet been transferred or performed under the relevant accounting policy. The unearned portion is carried as a liability until the revenue is recognized. The French expression produits constatés d’avance, or PCA, describes a related period-end concept.
The short answer
Deferred revenue separates billing or cash receipt from revenue recognition. Under ASC 606, contract liability is the relevant presentation term when the customer has paid, or payment is due, before the transfer of goods or services. French PCA and US terminology are useful counterparts, but their recognition and measurement must be assessed under the framework actually used.
Related terms, not automatic equivalents
| Term | Context |
|---|---|
| Deferred / unearned revenue | Common English terminology |
| Contract liability | ASC 606 presentation terminology |
| PCA | French produits constatés d’avance |
| Account 487 | French PCG account for PCA |
Scroll the table if needed.
A fictional time-based maintenance service
Assume a $6,000 maintenance contract is billed on March 1, 2027 for service from March 1 through August 31. Assume the service is earned evenly over time and the chosen day convention includes both endpoints. There are 184 service days, of which 153 fall after the March 31 close.
The illustrated deferred amount is $6,000 × 153 / 184 = $4,989.13. The amount allocated to March is $1,010.87. These are fictional amounts under explicit assumptions. A different pattern of performance, contractual provision or day convention can produce a different result.
Start with the service obligation
A bill issued early does not settle the revenue-recognition question. Read the contract, the service dates and any distinct obligations. For an evenly provided service, a time allocation can be useful; for other arrangements, simply dividing by days may not reflect what was delivered.
Retain the invoice, service period, recognized amount and deferred balance in the schedule. Compare the result with what is already booked to avoid recording the same deferral twice. Review credit notes and contract changes as part of the same population. The schedule should explain the movement from opening to closing balance.
Apply the right framework and version
The French PCG uses account 487 for PCA. ANC’s 2026 revenue amendments introduce provisions applying to financial years opened from January 1, 2027, with conditions and early application specified in the text. Check the applicable version and contract date when reviewing a French accounting treatment.
Document the adjustment in the close file
Close Review includes accrued- and deferred-revenue work from the invoice register. The workpaper gathers the supporting calculation and proposed adjusting entries for the team to review and post. The professional determines the policy, checks the input period and approves the conclusion.
Common questions
Is deferred revenue an asset or a liability?
It is normally a liability: it represents goods or services still to provide, subject to the applicable recognition and presentation rules.
Is it the opposite of accrued income?
The timing differs. Deferred revenue concerns amounts billed or received before performance; accrued income concerns earned amounts before billing. Review the contract rather than treating the labels as a formula.
Can every contract be calculated by days?
No. The example assumes an evenly delivered service. The appropriate recognition pattern depends on the contract and accounting policy.
Sources for further reading
Dated source checks do not replace review by the professional responsible for your engagement.
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