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 | |||
| 10,000(1) | ||||
| 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.