Contract Asset Account

The Contract Asset account represents an entity's right to request payment once the entity transfers previously nontransferred goods and services to customers, and when either party has already performed.

The contract asset account tracks an initial accrual for the right to request payment for all accrued goods and services promised in the contract at their revenue values. The account is:

• Debited by the recognition of either party's initial performance against relevant performance obligations.
• Credited when the business issues invoices or other instruments integrated with Revenue Management that represent the customer's unconditional acceptance of a payable.

Invoices and performance obligations don't necessarily have the same values. The performance obligation valuation amount is based on the relative method of allocation (the total transaction price when compared to the total of standalone selling prices for a contract) across performance obligations.