The Customer Paid. Can We Recognise Revenue Yet?
£120,000 in the bank on 1 December. The CEO calls it a good month. The CFO isn’t so sure.
01The situation
CloudBoard Ltd. sells business management software by subscription. On 1 December it signs a contract with NorthPeak Retail, which pays £120,000 upfront the same day.
Leo already has the entry ready: cash against revenue, all in December. Emma stops him.
| Price paid upfront | £120,000 |
|---|---|
| Software access | 12 months from 1 January |
| Initial setup | December, no separate benefit |
| Training | Two days in March |
| Stand-alone price: subscription | £120,000 |
| Stand-alone price: training | £10,000 |
02Your mission
Separate the cash from the revenue.
- Identify the performance obligations.
- Decide whether the setup is a separate obligation.
- Allocate the £120,000 between the obligations.
- Determine revenue for December.
- Calculate monthly subscription revenue and March training revenue.
- Prepare the main journal entries.
03Think first
What would you do?
Every case asks for your answer before it shows you the solution. Getting it wrong here is part of the method.
04The solution
This is how the solution starts. The rest is in the full case.
Allocation, December revenue, monthly schedule, training revenue and the balance sheet at 31 December.
Unlock for $9.90What’s included
Everything you need to solve it.
- PDF caseThe story, the facts and the questions.
- Excel modelContract liability and revenue, December to December.
- Complete solutionStep-by-step reasoning, not just the final number.
- Journal entriesCash receipt, monthly recognition and training.
- Common mistakesThe ones Leo would make. And probably you too.
- Final challengeA £15,000 uptime bonus: variable consideration.
WHAT YOU’LL PRACTISE
Preview
A look inside.
- p. 1Cover
- p. 3The Case
- p. 7The Solution
- p. 10Journal Entries
In this case
- Mike, CEOSees £120,000 and calls it revenue.
- Leo, Junior AccountantBooks everything in December.
- Emma, CFOSeparates cash from performance.
- Sarah, AuditorAsks when the obligation is satisfied.
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