FREE WORKBOOK
Revenue Recognition and Deferred Income
An annual contract billed upfront is cash today and revenue over twelve months; until earned, the remainder sits as deferred income, a liability, because the service is still owed. The workbook holds both views: one £2,400 contract recognised at £200 a month until deferred hits zero, and the company view where 80 annual-billed customers hold £96,000 at steady state. It is why the bank looks better than the P and L, and why neither is lying.
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Who this workbook is for
The founder reading the bank as permission
The founder reading the bank balance as permission. Deferred income is real money and a real liability at once; the schedule shows how much of the balance is actually yours yet.
The company moving to annual billing
Collecting ahead of recognising makes growth partly self-funding, and the steady-state balance is the size of the float you are building.
The team preparing accounts or a data room
Billed tied to earned is the first reconciliation an analyst runs, and corporation tax follows recognised revenue, not the cash that arrived.
