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Deferred Revenue


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I occasionally encounter "deferred revenue" from someone's balance sheet when trying to prepare their taxes.

I understand the IRS has a convention called "constructive receipt" which can change this from a balance sheet to actual taxable revenue.

What circumstances (other than cash basis accounting) can force "constructive receipt?"

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Deferred revenue can be best understood as Prepaid revenue.  Subscriptions, rent, insurance are examples.  Deferred revenue is most common among companies selling subscription-based products or services that require prepayments.

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I have a client  who is a coffee roaster who also sells espresso equipment. Occasionally, they will receive good sized deposits a month or two in advance of delivering

the espresso equipment to their customer, which I record as a liability.

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