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Categories explained: Income Received in Advance
Categories explained: Income Received in Advance
Steven Anderson avatar
Written by Steven Anderson
Updated over a week ago

In some cases you might invoice a customer in advance for work that you are completing over an extended period of time. In order to match the revenue with when you actually provide the goods/services, you have to move that revenue forward in time. This is called deferring income.

What's included

If you invoice a customer up front for work that is to be completed at a later stage, or hasn't been finished yet.

For example let's say you begin work in March on a six month project worth a total of £10,000 and invoice the customer half of the total in April. As it is only April and you have another month before you're at the half way point in the project, you should only recognise 2/3's of the total invoice and defer 1/3. Therefore at the end of April you will have recognised £3,333.32 as revenue and moved 1,666.68 in to deferred revenue.

What's not included

Accrued Income is not to be confused with deferred income, as this is when you move revenue backwards in to prior periods not forwards.

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