Revenue recognition
Revenue is recognised when it is earned, when the goods are delivered or the service is performed, and not when the cash arrives.
Cash received − Revenue earned = Deferred revenue (a liability, if positive)
Why it matters
Cash in advance is a promise to deliver, not income yet. Counting it as revenue on receipt would overstate the period in which it was collected and understate the ones in which the work is done.
Where it appears in a CFO+ model
- In every revenue line the activity sells, each recognised when delivered.
- In the balance sheet as deferred revenue when payment comes before delivery.
Learn the concept in the Academy
Activities where it shows up
- Agriculture & Production
- Café & Coffee Shop
- Catering
- E-learning
- Fintech
- Fuel Station
- Gym & Fitness Club
- Hospital
- International Freight & Clearance
- Jewelry & Gold
- Maintenance & Technical Services
- Marketplace Platform
- Medical Laboratory
- Metal Machining & Fabrication
- Printing & Packaging
- Real Estate Brokerage
- Real Estate Development
- Tourist Camp
- Tourist Resort
- Training & Development
- University or College
- Warehousing & Storage
No figures are published: a definition and a formula only.