Revenue
Revenue recognition timeline
Allocate a contract price to performance obligations and recognise it over time or at a point in time.
Halden Medical sells Northwind Clinics an imaging unit, installs it and supports it for two years under one contract signed in January 2027. Edit the prices, timing and billing to see how revenue is allocated and when it is recognised.
Step 3 · Transaction price
Fixed consideration after the bundle discount.
Total stand-alone selling prices 120,000.00; discount of 12,000.00 spread across all obligations in proportion to their prices.
Steps 2 and 5 · Performance obligations and timing
Billing schedule
| Invoice | Month | Amount | Remove |
|---|---|---|---|
| Obligation | Stand-alone price | Share | Allocated |
|---|---|---|---|
| Imaging unit | 90,000.00 | 75.00% | 81,000.00 |
| Installation and calibration | 6,000.00 | 5.00% | 5,400.00 |
| Support, 24 months | 24,000.00 | 20.00% | 21,600.00 |
| Transaction price | 120,000.00 | 100.00% | 108,000.00 |
✓ Revenue recognised over the contract 108,000.00 equals the transaction price 108,000.00.
Recognition by month and contract position
| Line | M1Jan 27 | M2Feb 27 | M3Mar 27 | M4Apr 27 | M5May 27 | M6Jun 27 | M7Jul 27 | M8Aug 27 | M9Sept 27 | M10Oct 27 | M11Nov 27 | M12Dec 27 | M13Jan 28 | M14Feb 28 | M15Mar 28 | M16Apr 28 | M17May 28 | M18Jun 28 | M19Jul 28 | M20Aug 28 | M21Sept 28 | M22Oct 28 | M23Nov 28 | M24Dec 28 | Total |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Imaging unit | 81,000.00 | – | – | – | – | – | – | – | – | – | – | – | – | – | – | – | – | – | – | – | – | – | – | – | 81,000.00 |
| Installation and calibration | 2,700.00 | 2,700.00 | – | – | – | – | – | – | – | – | – | – | – | – | – | – | – | – | – | – | – | – | – | – | 5,400.00 |
| Support, 24 months | 900.00 | 900.00 | 900.00 | 900.00 | 900.00 | 900.00 | 900.00 | 900.00 | 900.00 | 900.00 | 900.00 | 900.00 | 900.00 | 900.00 | 900.00 | 900.00 | 900.00 | 900.00 | 900.00 | 900.00 | 900.00 | 900.00 | 900.00 | 900.00 | 21,600.00 |
| Revenue for the month | 84,600.00 | 3,600.00 | 900.00 | 900.00 | 900.00 | 900.00 | 900.00 | 900.00 | 900.00 | 900.00 | 900.00 | 900.00 | 900.00 | 900.00 | 900.00 | 900.00 | 900.00 | 900.00 | 900.00 | 900.00 | 900.00 | 900.00 | 900.00 | 900.00 | 108,000.00 |
| Cumulative revenue | 84,600.00 | 88,200.00 | 89,100.00 | 90,000.00 | 90,900.00 | 91,800.00 | 92,700.00 | 93,600.00 | 94,500.00 | 95,400.00 | 96,300.00 | 97,200.00 | 98,100.00 | 99,000.00 | 99,900.00 | 100,800.00 | 101,700.00 | 102,600.00 | 103,500.00 | 104,400.00 | 105,300.00 | 106,200.00 | 107,100.00 | 108,000.00 | — |
| Cumulative billing | 75,600.00 | 97,200.00 | 97,200.00 | 97,200.00 | 97,200.00 | 97,200.00 | 97,200.00 | 97,200.00 | 97,200.00 | 97,200.00 | 97,200.00 | 97,200.00 | 108,000.00 | 108,000.00 | 108,000.00 | 108,000.00 | 108,000.00 | 108,000.00 | 108,000.00 | 108,000.00 | 108,000.00 | 108,000.00 | 108,000.00 | 108,000.00 | — |
| Contract asset | 9,000.00 | – | – | – | – | – | – | – | – | – | – | – | – | – | – | – | – | – | – | – | – | – | – | – | — |
| Contract liability | – | 9,000.00 | 8,100.00 | 7,200.00 | 6,300.00 | 5,400.00 | 4,500.00 | 3,600.00 | 2,700.00 | 1,800.00 | 900.00 | – | 9,900.00 | 9,000.00 | 8,100.00 | 7,200.00 | 6,300.00 | 5,400.00 | 4,500.00 | 3,600.00 | 2,700.00 | 1,800.00 | 900.00 | – | — |
A contract asset arises when revenue recognised runs ahead of amounts billed; a contract liability when billing runs ahead. Each invoice becomes a receivable once the right to payment is unconditional. Over-time obligations here use a straight-line, time-elapsed measure of progress, with any rounding cent in the earliest months.
Learn it properly
- Transaction price and allocation · Revenue, Expenses and Profit
- Over time or at a point in time · Revenue, Expenses and Profit
- SaaS: subscriptions and deferred revenue · Industry Accounting Cases
- Construction: contracts over time · Industry Accounting Cases
All companies and figures in the simulators are fictional.