We get many customers asking us how to model deferred revenue in our product. For example, one customer was selling 4 month maintenance contracts where cash was being collected at the time of the sale, and revenue earned evenly overly the life of the agreement. In this scenario there are a number of moving parts:
- The customer receives cash for the sale of the agreement.
- A liability must be established as the earnings process has not been completed.
- Revenue must be recognized as they are earned through the life of the agreement.
- Cost of Goods Sold need to be recognized for maintenance performed in accordance with the agreement.
If you have yet to read our About Modeling Sample post, get started by doing so. Next, save and open the attached company file and review the analysis it contains to see one ways deffered revenue can be modeled in PlanGuru.
Review the file starting with the Non-financial data tab, this is where the "drivers" are built into the model. All other amounts on the balance sheet and statement of revenues and expenses are built off the drivers from the Non-Financial data tab.
Download Deferred Revenue Example.zip