Deferred incomes are incomes received in advance before supplying goods or services. These funds increase the liquidity of a firm .Firms having good demand for its products and services can demand deferred incomes.
These proceeds increase the company’s liquidity in the shape of cash; as a result, they comprise a significant means of financing. Payments which were made by customers in advance comprise the major constituents of deferred income. These payments are ordinary in case of costly goods, where the product is in short supply and the seller has a tough bargaining power as compared to the buyer. These payments are not recorded as income until products and services have been supplied to the purchaser. They are, therefore, shown as a liability in the company’s balance sheet.
