I just started working for this software company and they do annual billing as opposed to billing monthly for services rendered. When they bill their customers they debit Accounts Receivable and credit Deferred Revenue. From what I remember in class you can't debit AR unless the revenue is earned. Am I wrong or are they doing it incorrectly?

They're paying in advance, which is where the deferred revenue account comes in to it. But for them to be able to pay, an invoice must be raised first, which means debiting the Debtor account (accounts receiveable).