Accounting for sharing of profit – revenue recognition

Nov 17, 2014
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How do I account for sharing of profits agreement? Lets say the profits estimated for the year of 2010 to be $100,000. It is billed at every quarter on a straight line basis starting from end of 2Q2010(June). The profits are adjusted at the end of last quarter(1Q2011) when actual sales can be determined eg. $125,000 overall – means additional 25,000 recognised in last quarter.

What is the correct way of recognizing revenue given $75k is billed in 2010 and $50k billed in 2011.

Thanks alot!


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