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Deferred revenue is generated when a business supplies its services to a customer and the services are invoiced in advance.
For example, suppose a business provides web design services and invoices for annual maintenance of 12,000 in advance. At the time of invoicing the service has not been provided and the service revenue has not been earned, it therefore needs to be credited to the deferred revenue account.
Service revenue is generated when a business supplies its services to a customer. The services can either be provided for immediate cash payment or more usually the services are provided on account and invoiced to the customer at a later date.
The invoicing of services on account means that an amount of money will be owed by the customer to the business, and this is referred to as a trade accounts receivable or trade debtor.
Credit card sales accounting will vary depending on whether or not the cash register is linked directly to the credit card company and cash is received immediately or whether payment is received from the credit card company at a later date.
As an example, suppose a business has credit card sales of 1,000 and the credit card company charges 2% (20) as a processing fee.
When a business sells goods on credit, it will issue a document to the buyer giving details of the goods and the prices. The document issued is called an invoice.
The business selling the goods will call it a sales invoice, and the buyer will call it a purchases invoice. An invoice is a legal document which can be used as evidence that the buyer owes money to the seller.
In accounting Sales Revenue refers to the monetary amount from the sale of goods in which the business normally trades and which were bought for the purpose of resale. For this reason Sales Revenue will always affect the Stock (Inventory) of the business. If a business normally sells widgets then the ‘sale’ of for example, a motor vehicle used within the business, is not included in Sales Revenue.