[header] How to account for deferred revenue [title] Familiarize yourself with the accrual basis of accounting. [step] Deferred revenue is an aspect of what is called the accrual basis of accounting. Under the accrual basis of accounting, revenues are recorded on the income statement when they are earned rather than received. 
This contrasts with the cash basis of accounting wherein the opposite is true. [title] Understand why you need to defer revenue.