Deferred Revenue

You sold a year's subscription to full-contact bass fishing premium service, the kind that shows you how to land bass with your teeth. You collected the cash up front the minute the buyer paid that $300. You have the cash. But you don't have the revenues. Huh?

Well, the $300 credit card cleared and you collected it. But you cannot recognize that money, according to GAAP accounting, until you have formally earned it. How do you earn it? Well, you just keep airing your bass premium service. A month goes by, and you can then recognize $300/12=$25.

After the first month ends, you then have a balance sheet asset of $275 in deferred revenue. Don't fudge that number or, uh...the IRS will think something fishy is going on.