Deferred Credit refers to income or income items a business receives but has not yet reported as income. An example would be a consulting firm receiving an advance payment before completing services for that payment. |
Using the example of the consulting firm above, if advance payment was not recorded as a Deferred Credit - instead recorded as straight revenue - if the job was complicated before the retainer was depleted, the revenue would need to be refunded.
In order to present a clearer accounting picture, deferred credit is a liability that is realized at a future date, namely when the good or service is actually provided.
Deferred Credit is also called deferred revenue or deferred income.