Billing For Revenue Recognition

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Four cases exist. In general if billings exceed revenue we have a customer deposit. If the revenue is greater than the billings we have unbilled revenue.  Typical threshold percent complete values for recognizing revenue would be 65%.

 

Billings > Revenue

Billings < Revenue

Costs don’t exceed threshold
•No revenue to recognize
•All billings are customer deposits
•All costs are WIP
•No revenue to recognize
•All billings are customer deposits
•All costs are WIP

Costs exceed threshold
•Revenue to recognize
•All costs are expensed
•Unbilled Revenue = Revenue - Billings
•Customer deposits = 0
•Revenue to recognize
•All costs are expensed
•Unbilled Revenue = Revenue - Billings
•Customer deposits = 0