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

00:00

Finance allah shmoop what is deferred compensation Well you don't

00:07

get it today You get it next year at some

00:11

point you know differed If you've gotten paid today it

00:15

would have binford but then it was deford's so well

00:20

yeah it's money you don't get right now Yeah so

00:22

whywould compensation be deferred Well lotsa reasons think about a

00:27

bonus that a sales person might earn through out the

00:29

year like they get two grand in bonus money payable

00:33

next year for each month that they sell over four

00:36

pounds of yellowcake uranium powder Bob here did it in

00:40

january messed around in february and march and was a

00:43

good boy in april may and june and then on

00:45

lee hit one more sales goal ahead of christmas doing

00:48

four pounds in uzbekistanian november So bob had five months

00:53

hitting his sales bonus target and we'll have owed to

00:57

him ten grand in bonus money e compensation that was

01:02

deferred and noting that all bonuses are paid in january

01:05

of the following year like it's deferred to the following

01:08

year So from the company's perspective they show deferred compensation

01:13

as a line item or a thing on their balance

01:17

Sheet is a liability And then they converted to being

01:19

an expense when they pay everything out the first month

01:22

of the next year so come january Bob will be

01:26

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

Finance: What does "Tax Deferred" mean?
509 Views

What does "Tax Deferred" mean? Tax deferred refers to investments in government approved accounts that allow a tax deduction for the contributions...

Finance: What is a Contingent Deferred Sales Charge?
10 Views

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...

Find other enlightening terms in Shmoop Finance Genius Bar(f)