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Simple English definitions for legal terms
deferred income
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A quick definition of deferred income:
Deferred income is money that you will receive at a later time, even though you earned it earlier. For example, if you earned commissions in November but received the check in January, that is deferred income. It is important to keep track of deferred income for tax purposes.A more thorough explanation:
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.