Deferred Credit
Amazon Prime has become one of the premier subscription services on the internet, combining expedited delivery, original video content streaming, music streaming, and a voluminous library of books to download and read on a Kindle. However, since the subscription fee is paid up from each month for the future service, it's considered, for bookkeeping purposes, to be a "deferred credit." It's removed as a liability from the corporate balance sheet when the service receipt has been realized and balanced out.
Any type of payment remitted up front ahead of service or product receipt is considered a deferred credit. This includes mail-in or internet orders for products or services from food deliveries to downloads of software to retainer fees for attorneys.
Related or Semi-related Video
Finance: What is Deferred Compensation?8 Views
Finance allah shmoop what is deferred compensation Well you don't
get it today You get it next year at some
point you know differed If you've gotten paid today it
would have binford but then it was deford's so well
yeah it's money you don't get right now Yeah so
whywould compensation be deferred Well lotsa reasons think about a
bonus that a sales person might earn through out the
year like they get two grand in bonus money payable
next year for each month that they sell over four
pounds of yellowcake uranium powder Bob here did it in
january messed around in february and march and was a
good boy in april may and june and then on
lee hit one more sales goal ahead of christmas doing
four pounds in uzbekistanian november So bob had five months
hitting his sales bonus target and we'll have owed to
him ten grand in bonus money e compensation that was
deferred and noting that all bonuses are paid in january
of the following year like it's deferred to the following
year So from the company's perspective they show deferred compensation
as a line item or a thing on their balance
Sheet is a liability And then they converted to being
an expense when they pay everything out the first month
of the next year so come january Bob will be
very happy with his healthy bonus That is you know 00:01:29.357 --> [endTime] assuming he's still around to enjoy it there No
Up Next
What does "Tax Deferred" mean? Tax deferred refers to investments in government approved accounts that allow a tax deduction for the contributions...
What is a Contingent Deferred Sales Charge? A Contingent Deferred Sales Charge is a fancy name for a back load fee for mutual fund B shares. Basica...