Accounting Entries With Contract Liability

These examples illustrate how the system generates accounting entries with contract liability for the following scenarios:

Non-Contract Liability

Invoice details are:

• Bill line amount: 90.00 USD.

• Revenue recognition basis: invoice date.

• Accounting Date: 8/15/2000.

  Accounting Date	Account Type	Debit Amount	Credit Amount
  8/15/2000	AR	90.00 USD
  8/15/2000	Revenue		90.00 USD

Simple Contract Liability (Single Date for Recognizing Revenue)

Invoice details:

• Bill line amount: 90.00 USD.

• Revenue recognition basis: ship date.

• Ship date: 9/30/2000.

• Accounting date: 8/15/2000.

• Accounting calendar: monthly.

• Deferred accounting date code: last day of period.

  Accounting Date	Account Type	Debit Amount	Credit Amount
  8/15/2000	AR	90.00 USD
  8/15/2000	Contract Liability		90.00 USD
  9/30/2000	Contract Liability	90.00 USD
  9/30/2000	Revenue		90.00 USD

Complex Contract Liability (Date Range for Recognizing Revenue)

Invoice details:

• Bill line amount: 90.00 USD.

• Revenue recognition basis: charge from/to date range.

• Charge from date: 8/15/2000.

• Charge to date: 11/30/2000.

• Accounting date: 8/15/2000.

• Accounting calendar: monthly.

• Deferred accounting date code: first day of month

  Accounting Date	Account Type	Debit Amount	Credit Amount
  8/15/2000	AR	90.00 USD
  8/15/2000	Contract Liability		75.83 USD
  8/15/2000	Revenue		14.17 USD
  9/1/2000	Contract Liability	25.00 USD
  9/1/2000	Revenue		25.00 USD
  10/1/2000	Contract Liability	25.83 USD
  10/1/2000	Revenue		25.83 USD
  11/1/2000	Contract Liability	25.00 USD
  11/1/2000	Revenue		25.00 USD

Note:

Proration of the invoice amount over accounting periods is accomplished by the proration method value Spread by Days Within Range, using the following formula: Period amount = line amount x number of days in period / number of days spanned by date range.

For example:

Period amount = 90 (line amount) x 31 (number of days in period of October) / 108 (number of days spanned by date range from 8/15 to 11/30).

Calculate debit amount of 25.83 USD to contract liability for 10/1/98 as follows: 90 x 31 / 108.