Recognizing AR billed for unearned revenue

[mayes89]

Hi,

Can I check if we were to invoice customers early without meeting revenue recognition yet, is it okay to recognize it under

Dr AR
Cr Unearned revenue

Or AR can only be recognized only if revenue is earned and billed but not received.

 

[kirby]

If you have not earned the revenue, you have no business recording it. Folks who do so are said to be committing "fraud."

 

[Scramble!]

@kirby:

What account would you credit for UNearned revenue, if not Unearned Revenue? The treatment proposed by mayes89 seems reasonable to me and not fraudulent. If the entry were

Dr AR
CR Revenue

Then that would be fraudulent. I don't understand why you think unearned revenue should not be credited to Unearned Revenue.

 

[bklynboy]

You can record unearned revenue when you invoice something prior to performing service or delivering goods. For instance, you may require that an upfront payment be made prior to commencing the service. For me we do not set up AR but recognize when cash is received before service provided. Can't say its wrong to do at time of invoice though IMO as long as the AR coincides with the terms and you are not booking an AR before its actually due to you.

 

[Counterofbeans]

Record it in AR, or damn-near any other current asset account, all you want. As long as you have the corresponding credit to a liability account, in this case Unearned Revenue, there's no problem.

You could get some angst if someone actually tries to reconcile AR and Revenue, as this would be a reconciling item, but there's no accounting issue whatsoever otherwise.