Bill in Advance of Revenue Recognition

When you bill your client before you recognize revenue, the billed/unearned accrual account is used. The following scenario bills the client for $10,000 and recognizes $10,000 in revenue.

GL Transactions AC Transactions
Accounts Receivable
Debit Credit
Billed/Unearned Billed/Unearned (c)
Debit Credit Debit Credit
10,000(2) 10,000(1) 10,000(2) 10,000(1)
Revenue Revenue (p)
Debit Credit Debit Credit
10,000(2) 10,000(2)

Transaction 1 (1)

This entry debits Accounts Receivable $10,000. Since billing occurs first, the billed/unearned account is credited.

Transaction 2 (2)

This entry recognizes $10,000 in revenue. The billed/unearned balance is cleared and the revenue account is credited.