Simple English definitions for legal terms
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Deferred income refers to money that is received at a later time than when it was earned. For example, if a salesperson earns a commission in November but receives the check in January, that commission is considered deferred income.
Other examples of deferred income include prepaid rent, prepaid insurance, and gift cards that have been purchased but not yet redeemed.
Deferred income is important for accounting purposes because it represents a liability for the company that owes the income. It is also important for tax purposes because it may be taxed in a different year than when it was earned.