ayodayo

Deferred revenue is same as Unearned Revenue (a liability).
If you are a magazine publisher, you have collected the revenue of $120 for a year's subscription from a reader, but you have only delivered the current month's issue to the customer, then record the one month's part of the annual subscription ($10) as Revenue in Income Statement and other 11 months' portion is recorded as deferred Revenue under Liabilities.

But, I am not sure whether deferred revenue will lower the quality of earnings. Although it seems as if it would increase Operating liability and hence reduce the Net Operating Assets (Operating Asset - Operating Liability). Thus deferred revenue may lead to reduction in Accruals ratio and that will mean the quality of earnings is going up.

The second paragraph above is my guess. I do not have the book in front of me.

Let us see what others have to say.

Best of luck to you all in your forthcoming exams.