[quote]<font face="Verdana, Arial, Helvetica, sans-serif" size="2">Originally posted by lensman:
[b]
Originally posted by Mountain Trader:
Actually, no, deferred revenue winds up as a liability on the balance sheet until it is taken into revenue.
So the cash from sales ends up as cash (an asset), the deferred revenue itself ends up as a (balancing) liability, and this liability disappears when the revenue is recognized?</font>
Exactly. Think of it this way: If you prepay a one year newspaper subscription, the paper should record 1/12 of your cost as revenue each month. If they stop publication after 9 months, they owe you 25% of what you paid. This illustrates why unearned (deferred) revenue is a liability.
[This message has been edited by Mountain Trader (edited 10-13-2003).]
[This message has been edited by Mountain Trader (edited 10-13-2003).]