Deferred revenue accounting
If a customer pays $100 for a service that will be delivered next year, cash increases by $100 and deferred revenue increases by $100, and the balance sheet balances. Now as that revenue is recognized, how does the balance sheet end up balancing assuming a tax rate of 20%? Retained earnings increase by only $80 whereas deferred revenues decrease by the $100. I feel like I’m being pretty slow and missing something …
thanks
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