Basic Accounting Entries in Revenue Management
This topic describes the sequence of accounting events that can occur, depending on whether the first action is fulfillment or invoicing.
This table shows the sequence of accounting events when the first action performed on a performance obligation is fulfillment:
Event | Description | Debit | Credit |
---|---|---|---|
Initial performance event | Accounting for the initial performance event. | Contract Asset account | Contract Liability account |
Fulfillment | Recognize revenue. | Contract Liability account | Contract Revenue account |
Invoicing | Accounting for billing and the allocation discount when the allocated amount is more than the invoice amount. | Contract Clearing account Contract Discount account |
Contract Asset account |
Invoicing | Accounting for billing and the allocation discount when the allocated amount is less than the invoice amount. | Contract Clearing account | Contract Asset account Contract Discount account |
This table shows the sequence of accounting events when the first action performed on a performance obligation is invoicing:
Event | Description | Debit | Credit |
---|---|---|---|
Invoicing | Accounting for the initial performance event. | Contract Asset account | Contract Liability account |
Invoicing | Accounting for billing and the allocation discount when the allocated amount is more than the invoice amount. | Contract Clearing account Contract Discount account |
Contract Asset account |
Invoicing | Accounting for billing and the allocation discount when the allocated amount is less than the invoice amount. | Contract Clearing account | Contract Asset account Contract Discount account |
Fulfillment | Accounting to recognize revenue. | Contract Liability account | Contract Revenue account |