When would a company collect cash from a customer and not record it as revenue?

Three examples come to mind:

1. Web-based subscription software.

2. Cell phone carriers that sell annual contracts

3. Magazine publishers that sell subscriptions

Companies that agree to services in the future often collect cash upfront to ensure stable revenue – this makes investors happy as well since they can better predict a company’s performance.

Per the rules of accounting, you only record revenue when you actually perform the services – so the company would not record everything as revenue right away.