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Unearned 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 maintenance services and invoices for annually in advance. At the time of invoicing the service has not been provided and none of the revenue has been earned, it therefore needs to be credited to the unearned revenue account.
When a business receives a cash advance from a customer for goods not yet delivered, it needs to record this a balance sheet liability and not revenue. When the goods are delivered, the revenue is earned, and the cash advance can be used to clear the balance on the customer accounts receivable account.
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.